New Home SalesCENSUS
509K
U.S. Housing Market · 1991 · NBER recession
U.S. Housing Market in 1991
1991 troughS&L recessionrates below 9.5%
Existing SalesNAR
3.22M
Median PriceNAR
$97,100
30Y MortgagePMMS
9.25%
Existing-home sales bottomed at 3.22M in 1991 — the trough of the long, mild S&L-era housing slowdown.
The 1990–91 recession was housing-led: regional banking stress (the Resolution Trust Corporation was working through 1,043 failed thrifts), the first Gulf War, and the residual hangover from 1986's tax reform combined to slow the market. Mortgage rates fell back below 9.5% for the first time since 1979, beginning the long descent that would carry rates under 7% by 1998.
Macroeconomic Context
The 1990–91 recession reached its trough in March 1991 — a relatively short downturn by historical standards, though the recovery proved frustratingly slow. Real GDP contracted about 0.1% for the full year (severe declines early, modest recovery later), unemployment rose to a peak of 7.8% in June before beginning a gradual descent, and inflation fell to approximately 4.2% — partly reflecting the oil-price spike reversing as the Gulf War ended quickly in February. President Bush's approval ratings reached historic highs after the rapid coalition victory in Kuwait, though the domestic economy would become a serious political liability by 1992.
The Federal Reserve cut the federal funds rate aggressively throughout 1991 — from about 7% at the start of the year to 4.5% by year-end — as the recession persisted and inflation fell. Mortgage rates responded, declining from 10.13% in 1990 to approximately 9.25% in 1991. Each percentage point of rate reduction improved affordability and gradually drew price-sensitive buyers back toward the market. But the credit channel remained impaired: banks and thrifts that had suffered severe real estate losses were rebuilding capital ratios by tightening lending standards rather than extending new credit, a dynamic that the Fed's rate cuts could not fully offset.
The RTC continued its massive disposal of failed thrift assets, adding foreclosed homes and distressed properties to markets already under stress in the Northeast, California, and the Southwest. In these regions, home prices declined in real terms and sometimes in nominal terms — a phenomenon that had been essentially unknown in the postwar era — creating negative equity situations for homeowners who had bought at peak prices in the late 1980s.