Ok math whiz: a $85k 30 year mortgage with 12% interest in 1985 actual total cost was $315k. A $315k 30 yr mortgage today at 3.8% is $525k total. $315,000 in 1985 is equivalent in purchasing power to about $751,664.36 in 2019. So it’s cheaper today to buy a median price home🤷🏼♂️ https://t.co/W0tXSMUjmS
— William Shatner (@WilliamShatner) November 10, 2019
I am once again reminded how expected returns is a critical concept in macroeconomics. Circa 1985, you could expect to earn much higher returns putting money in a certificate of deposit, thus increasing the opportunity of buying a house back then. No, you would not earn 12% on your money, but still we need to reckon with the higher opportunity cost of funds to calculate the true home purchase/mortgage cost at that time.