Ask any grandparent: “is it actually true that St. Cloud mortgage rates averaged more than 18%?” They’ll tell you. It happened. And that was less than 40 years ago.

The reason to revisit such an unimaginable scenario isn’t that anyone expects St. Cloud mortgage rates to repeat that history anytime soon (or anytime, period). It’s useful to recall because the current era of incredibly low home loan rates has been going on long enough that it’s beginning to seem to be the natural order of things.

Psychologists recognize the human tendency called “normalcy bias”—the inclination to overestimate the likelihood that current circumstances will continue. That would be harmless enough, were it not for the fact that it leads otherwise rational humans to discount the possibility of change—even if a threatening change could be avoided. In the current instance, the cozy financial climate made possible by the succession of low mortgage rates could lull would-be homebuyers (especially first-timers) into missing opportunities that might not be repeated.

The risk embodied by this particular normalcy bias comes into focus when you review just how infrequently the current rate environment develops. Quasi-governmental mortgage backer Freddie Mac publishes the benchmark PMMS (Primary Mortgage Market Survey) statistics. They show that the 30-year home loan interest rate over the past two years has averaged a benign 3.8%—ending with the most recent rate (last Thursday): an extraordinary 2.88%.

Based on the past two years’ experience alone, it might be tempting to stand by to wait for even lower rates. But that would be less reasonable if the Big Picture is taken into account. When you look at the entire history since Freddie started keeping track, you find that the average rate since 1971 is 7.4%—double what has seemed so normal recently. In contrast to the actual historical norm, the past two years’ “normal” averages amount to something like a continuous succession of 50% fire-sale discounts!

The psychologists frequently discuss “normalcy bias” with another phenomenon, “analysis paralysis.” Given 2020’s deluge of nearly overwhelming, never-before-seen events, the combination of the two could certainly make understandable holding off on any major initiative (like buying and selling a home). That’s understandable—even if once-in-a-lifetime opportunities present themselves. At any rate, it’s at least a serious thought on whether this fall could be a rare opportunity for your own St. Cloud real estate initiative. If you’d like to discuss current possibilities, I hope you’ll call!

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