[quote=TheBreeze]I wasn’t alive back then, but I’ve read that Volcker took interest rates to 13% back in the early 80’s in order to combat hyperinflation. That would be a little less than a doubling of the interest rate from here. What would happen to housing if that happened? Could prices get cut in half even from these levels?
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Wow, you weren’t alive in the early 80s? Assuming you were alive by 1985, that makes you 23 tops?
I was wild, young and single back then, but my recollection is that housing prices had skyrocketed by the early 80s. For example, my father bought a house for $21K in 1970 and by the early 80s, he bought a similar house for just over $75K in the same area….housing prices had tripled. That is probably due to the high rate of inflation during the late seventies, early 80s…remember the phrase “stagflation” and WIN (“Whip Inflation Now”) buttons?
People were still buying homes in the early 80s (at least those I knew), I assume because wages and everything else were rising considerably also.
America was pretty down on itself in those days and the big topic of the times was that we were no longer competitive, that Japan was kicking our arse. Of course, it wasn’t longer after that when Japan’s economy went into the toilet, an event from which they are still recovering right now. Just listen to some Springsteen albums from the era (“The River”, “Nebraska”) or even Kinks (“Low Budget”) to get a feel for the mood of the country and the world in the early 1980s. Low Budget seems especially apropo as it has songs about gas prices (A Gallon of Gas), health insurance (National Health), and cutting back during hard times (Low Budget).
Though unemployment was high, I was still able to find jobs in the early 80s…I was a lowly college student so they weren’t great jobs, but they paid the few bills I had.
Bottom line: life went on, but it is not necessarily a period that most people would want to live through again…though we may be about to do so.
