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We know an editor who says her favorite word is “context.” She is a good editor.
In light of this and in acknowledgement of Mark Friedman’s article on the drop-off in home sales in some of Arkansas’ most populous counties, we’d like to point out two things.
The first is that this current high mortgage rate environment is really, historically speaking, not that high. The average 30-year fixed-rate mortgage stood at 7% in January 2001, falling to 4.9% by the end of that decade, which saw the Great Recession. Going back a decade further, the rate was 9.6% in January 1991. That still remained far below the truly terrifying heights achieved on Oct. 16, 1981, when the average 30-year fixed-rate mortgage hit 18.5%.
But as Mervin Jebaraj, the director of the Center for Business & Economic Research at the University of Arkansas, noted, that’s little comfort to those seeking a mortgage now.
Our second observation is that a world of high interest rates, while a bad one for those with debt or seeking a loan, can be a good one for savers with cash. Investors flooded into the stock market when they saw the minuscule returns of once-popular financial instruments like certificates of deposit. Now, high-yield savings accounts and CDs and Treasury bills are much more appealing.
The key to navigating a changing financial landscape is to first recognize that it is changing and then to adapt.
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