U.S. Housing Market in 1989

In 1989, the U.S. housing market recorded existing-home sales averaged 3.34 million, new-construction sales of 650K, a median existing-home price of $93,100, and a 30-year fixed mortgage rate of 10.32%.

Year over year, existing-home sales fell 4.8% from 1988, new-home sales fell 3.8%, the median existing-home price rose 4.3% to $93,100, the 30-year fixed mortgage fell 0.02 points to 10.32%. Compared with five years earlier (1984), existing-home sales were 18% above 1984, median prices were 29% higher in nominal terms, the prevailing mortgage rate sat 3.56 points below the 1984 reading.

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

1989 was the year the post-Cold War order began. The Berlin Wall fell on November 9; the Eastern European democratic revolutions cascaded through autumn; Tiananmen Square in June established the limits of the political opening in China. Domestically, real GDP grew 3.7%, CPI inflation rose to 4.8%, and unemployment ended the year at 5.4%. The federal funds rate peaked at 9.7% in February before the Fed began easing as the S&L cleanup and the impending recession became visible. The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), signed in August, abolished the FSLIC, transferred deposit insurance to the FDIC, and created the Resolution Trust Corporation to manage the insolvent S&L cleanup. Total taxpayer cost would eventually reach roughly $124B.

The Mortgage & Credit Market

30-year fixed mortgage rates fell to 10.32%. Originations slowed as the incipient recession began. FIRREA's transfer of S&L resolution to the RTC began the largest real-estate workout in U.S. history; the RTC would ultimately resolve 747 thrifts and dispose of $402B in assets, much of it commercial real estate. The thrift industry's dominance in mortgage origination was effectively ending; commercial banks and mortgage brokers, funded by GSE securitization, would dominate the 1990s and beyond.

Cycle Position

Existing-home sales eased to 3.34M, down 5% YoY. New-home sales fell to 650,000. The median existing home cost $93,100. The cycle was rolling over into recession: the 1990 trough would be visible by early summer 1990, and the S&L crisis would dominate the regional housing markets through 1991-92.

The Year in Long View

Existing-home sales of 3.34M in 1989 represented 47% of the all-time annual peak (7.08M in 2005) and ran +68% above the modern-era trough of 1.99M (1982). New-home sales of 650K were 51% of the 2005 record (1,283K) and 212% of the absolute series low (306K in 2011). Combined U.S. home sales of 3.99M ran 48% of the 2005 all-time peak (8.36M total). Within the 1980s, the 1989 reading sat 12% above the decade average of 2.98M existing-home transactions per year. The median existing-home price of $93,100 translates to roughly $235,903 in 2024 dollars — about 58% of 2024's $408,000 record in real terms. Buyers in 1989 were not paying anything close to today's inflation-adjusted prices. Against the median U.S. household income of $29,943, the price-to-income ratio worked out to 3.1× — compared with 2024's all-time-high reading of 5.4×, which marks the most stretched affordability in the modern record. The 30-year fixed mortgage rate of 10.32% sat 2.62 points above the full-history (1971–2024) PMMS average of 7.7% and 3.48 points above the 2024 reading of 6.84%. At that rate, the principal-and-interest payment on a $200,000 30-year mortgage would have been roughly $1,803/month. Year-over-year, existing-home sales fell 4.8% from 1988, new-home sales fell 3.8%, the median existing-home price rose 4.3%. Looking forward to 1990: existing sales would fall 3.9% to 3.21M, the 30-year fixed would fall 0.19 points to 10.13%.

Sources & Methodology

The 1989 figures on this page come from three federal data sources: the U.S. Census Bureau Survey of Construction (annual new single-family home sales), the National Association of Realtors Existing Home Sales report (annual existing-home transactions and median sale prices), and the Freddie Mac Primary Mortgage Market Survey (annual average 30-year fixed mortgage rate). Recession bands are drawn from the National Bureau of Economic Research Business Cycle Dating Committee. Inflation adjustments use the Bureau of Labor Statistics' CPI-U series, and price-to-income ratios reference the Census Bureau's annual median U.S. household income table.