New Home SalesCENSUS
650K
U.S. Housing Market · 1989
U.S. Housing Market in 1989
Existing SalesNAR
3.34M
Median PriceNAR
$93,100
30Y MortgagePMMS
10.32%
In 1989, the U.S. housing market recorded existing-home sales averaged 3.34 million, new-construction sales of 650K, and a 30-year fixed mortgage rate of 10.32%.
Existing-home sales fell 4.8% from 1988. the median existing-home price rose 4.3% to $93,100. the 30-year fixed mortgage fell 0.02 percentage points to 10.32%.
By the numbers — 1989: new-home sales 650K, existing-home sales 3.34M, median existing price $93,100, 30-year mortgage rate 10.32%.
Macroeconomic Context
The expansion of the 1980s began to show signs of fatigue in 1989, though the recession would not officially begin until July 1990. Real GDP grew approximately 3.7% — still solid — unemployment held near 5.3%, but inflation accelerated to about 4.8% as oil prices firmed and wage growth continued. The Federal Reserve maintained its tightening posture through early 1989, with the federal funds rate reaching 9.8% in early spring before the Fed began a gradual easing cycle in response to slowing growth and the emerging S&L crisis.
The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989 was the most significant banking legislation since the Depression. It abolished the Federal Home Loan Bank Board and the FSLIC, replacing them with the Office of Thrift Supervision (OTS) and the newly created Resolution Trust Corporation (RTC) — charged with resolving and liquidating the assets of failed savings institutions. The RTC would eventually handle more than 700 insolvent thrifts with combined assets exceeding $400 billion. FIRREA also raised capital requirements for thrifts and restricted their ability to make non-mortgage investments — in effect reversing much of the Garn-St. Germain deregulation of 1982.
Mortgage rates averaged approximately 10.32% — nearly unchanged from 1987–88 — and housing markets in many regions began softening. New England and California, which had experienced the sharpest price appreciation, saw transaction volumes decline as affordability constraints and tightening credit standards slowed activity. The overbuilding of commercial real estate that had been financed by S&Ls was beginning to generate visible distress, and the excess supply would eventually spill over into residential markets through foreclosures and bank balance-sheet stress.