New Home SalesCENSUS
886K
U.S. Housing Market · 1998
U.S. Housing Market in 1998
sub-7% rates1990s boom peakfirst 4.9M+ year
Existing SalesNAR
4.97M
Median PriceNAR
$128,400
30Y MortgagePMMS
6.94%
1998 saw existing-home sales cross 4.97M — an all-time high to that point — as 30-year mortgage rates fell below 7% for the first time since 1971.
The 1990s expansion was reaching the housing market. Median existing prices hit $128,400, up 6.0% YoY. New construction reached 886K, the highest since 1978. The Federal Reserve's late-1998 rate cut (in response to the LTCM collapse) added a final push that would carry sales higher for two more years before the dot-com slowdown.
Macroeconomic Context
Nineteen ninety-eight tested the resilience of the U.S. expansion with a pair of international financial shocks. Russia defaulted on its sovereign debt in August, triggering a global flight to quality that nearly toppled Long-Term Capital Management — a Greenwich, Connecticut hedge fund whose collapse would have had cascading consequences for the U.S. financial system. The Federal Reserve orchestrated an LTCM bailout in late September and cut the federal funds rate three times between September and November, lowering it from 5.5 percent to 4.75 percent.
The rate cuts, combined with a global rush into U.S. Treasuries, pushed mortgage rates to their lowest levels since the early 1970s. The 30-year fixed average fell to roughly 6.9 percent for the year, dipping below 7 percent for the first time in decades. Consumer price inflation measured only 1.6 percent — partly because global commodity prices collapsed as Asian demand evaporated — giving the Fed ample room to ease.
GDP growth came in at approximately 4.4 percent, demonstrating that the U.S. real economy was remarkably insulated from the Asian and Russian turmoil that battered emerging markets. The dot-com boom was intensifying: venture capital flowed freely, stock options created paper wealth for millions of technology workers, and consumer confidence reached multi-decade highs.
For housing, the confluence of low rates, strong employment, and rising wealth effects produced a banner year. Existing-home sales surged past 4.9 million — a new record — and median prices accelerated. The Taxpayer Relief Act of 1997 was now fully in effect, further stimulating trade-up buying. The late-1990s housing boom was well underway.