The global economy was in very rough shape in 1980. Caught in the spiral of the Great Inflation, there was practically nowhere to hide from ripping upheaval – beyond just the economic problems. Despite trying seemingly everything for an entire decade, nothing Economists came up with would rebalance the system.

They kept saying they only needed time for their schemes to work. By the summer of ’80, no one outside the ideology was left to believe them. Even Congress in rare bipartisan fashion denounced “demand side” Economics for leading the country into chaos.

The US economy finally broke. After sustained waves of inflation combined with higher and higher unemployment (just Milton Friedman has predicted more than a decade before), in January 1980 the nation fell into official recession. It was only the beginning. Though that particular contraction was short, lasting only seven months “officially”, according to the NBER, it was severe on its own and merely the first of two in close succession.

In August 1980, the month of recovery, which only meant the bottom of that recession, interest rates were obscene. The 10-year US Treasury had ended 1979 yielding around 10%. By February 1980, it was nearly 13%. Now that was a BOND ROUT!!!!

Mortgage rates, of course, followed. In December 1979, the average 30-year fixed loan cost a little less than 13% interest. In April 1980, it was as high as 16.5%.

Mortgage rates would fall during that spring and summer, but those who were intent on buying and building houses for the month of August had booked their loans at or near these peaks. According to the US Census Bureau, in that first month of initial recovery homebuilders had managed to sell 61,000 (not seasonally adjusted) new single-family dwellings across the United States.

That was down sharply from August 1979, when sales of new homes had reached 68,000. The peak for that particular housing cycle was two years earlier in August 1977. During that month, the government estimates 74,000 new homes had been built and sold.