New Home SalesCENSUS
676K
U.S. Housing Market · 1988
U.S. Housing Market in 1988
Existing SalesNAR
3.51M
Median PriceNAR
$89,300
30Y MortgagePMMS
10.34%
In 1988, the U.S. housing market recorded existing-home sales averaged 3.51 million, new-construction sales of 676K, and a 30-year fixed mortgage rate of 10.34%.
Existing-home sales rose 2.0% from 1987. the median existing-home price rose 4.3% to $89,300. the 30-year fixed mortgage rose 0.13 percentage points to 10.34%.
By the numbers — 1988: new-home sales 676K, existing-home sales 3.51M, median existing price $89,300, 30-year mortgage rate 10.34%.
Macroeconomic Context
The U.S. economy in 1988 was performing well on the surface: real GDP grew approximately 4.1%, unemployment fell to 5.5% — the lowest since 1974 — and inflation nudged up to about 4.1% as the economy reached and then exceeded its full-employment ceiling. Vice President George H.W. Bush won the presidential election in November, largely on the strength of the Reagan economic record. The Federal Reserve, concerned about inflationary pressure from a tightening labor market, raised the federal funds rate steadily through the year to approximately 8.8% by year-end.
The savings and loan crisis was in full view by 1988. More than 200 thrift institutions were resolved or assisted during the year by the Federal Savings and Loan Insurance Corporation (FSLIC), which was itself technically insolvent. The scale of the problem — driven by fraud, mismanagement, and the deadly combination of deregulated lending powers with insured deposits — was far larger than regulators had publicly acknowledged. President-elect Bush signaled that a major legislative bailout would be a first-year priority, and the eventual Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 was being actively designed.
Mortgage rates averaged approximately 10.34% — nearly flat with 1987 — as the Fed's tightening pushed short-term rates higher but the Treasury yield curve flattened. Housing activity was also roughly flat: the mid-1980s recovery had run most of its course, and in many coastal markets — California, the Northeast — prices had risen to levels that strained affordability even at 10% rates. The next cyclical downturn was approaching, though its timing was not yet clear.