In May of this year, the typical homebuyer spent less than one-third (about 32.8 percent) of his or her household income on housing. As uncomfortable as that may be, it's not nearly enough compared to what homebuyers were putting into their homes in the early 1980s.

In 1981, the year the AIDS virus was identified, the Iranian hostage crisis ended, and Raiders of the Lost Ark topped the box office charts, homebuyers in September and October spent 51.3 percent of their household income on their mortgage payments.

Let's calm down for a moment.

Furthermore, that percentage doesn't even include what they pay for utilities, property taxes, insurance and homeowners' association fees.

Danielle Hale, chief economist for Realtor.com®, says buying a home "isn't as unaffordable as it used to be." However, "in general terms, housing is pretty unaffordable now."

To figure out how affordable buying a home has been over the past 50 years, the Realtor.com data team analyzed data from 1973. We looked at monthly existing single-family home prices from the National Association of Realtors®, weekly 30-year fixed loan mortgage rates from Freddie Mac, and annual median household income from the U.S. Census Bureau. We then calculated the typical mortgage payment for a homebuyer who took out a loan to purchase a median-priced home, and that payment as a percentage of their household income.

The analysis did not take into account regional price differences, new construction or the percentage of an individual homebuyer's income spent on the purchase.

"If you go back in history," Hale said, "you'll find a period of time when housing was more unaffordable than it is now." But you have to go back almost 40 years.

Why are today's homebuyers reluctant to purchase a home in 1981?

In the fall of 1981, homes were still cheap by today's standards.

According to the latest NAR data, the typical single-family home cost just $66,125, about six times less than it did in May of this year.

However, according to the U.S. Census Bureau, the typical family's income in 1981 was just $19,074. Mortgage rates in the fall of that year were a whopping 18 percent. (And you thought 7 percent was a high rate).

These extraordinarily high rates meant that 99.5% of a homebuyer's first year's mortgage payment would go toward paying high interest on the loan. It's not until the 18th year of the loan, assuming the buyer doesn't refinance - which most buyers do - that the buyer pays 10% of the principal balance. (This calculation includes a 20% down payment).

Today, the average family earns about $73,505 a year. But in May, they're dealing with a median existing-home price of $410,100 and a mortgage rate that hovers around 6 percent, which has risen to a high of 6 percent. About 85 percent of their first-year mortgage payment goes toward interest.

An important difference is that instead of waiting nearly 20 years to pay off 10 percent of their principal, they achieved that milestone in their seventh year.

"Mortgage rates play a very important role in housing affordability at any given time, especially because many homebuyers purchase their homes with a mortgage," Hale said.

There are some similarities between 1981 and now. inflation spiked in the early '80s, causing the Federal Reserve to raise interest rates. (Sound familiar?) In 1981, the U.S. also fell into a full-blown recession. Forty-two years later, the U.S. appears to be experiencing another recession.

In the early 1980s, the number of home sales slowed down, as did the post-Great Depression real estate market, as mortgage rates rose and fewer people could afford to buy homes.

Then, as now, most homebuyers earned more than the median income unless they had very generous family members, stock options or trust funds. Or they were existing homeowners who could put the equity from their last home into their new home.

Boomers have long been saying that life was tougher when we were younger. In some ways, they're right," Hale said." But in other ways, their student loan debt and childcare costs weren't as high as those of today's youth."

In addition, once mortgage rates fell, most people who purchased homes in the early 1980s refinanced to lock in the new rates, thereby "dramatically" lowering their monthly mortgage payments. By 1986, interest rates had fallen back to single digits.

Although it may seem counterintuitive, recessions can be financially advantageous to homebuyers purchasing a home - if they are still employed and have enough money to do so. That's because interest rates typically fall during a recession (but not always, as the early 1980s proved). This makes home ownership more affordable.

Over the past 50 years, homes were most affordable when the U.S. was coming out of the Great Recession. in early 2012 and 2013, homebuyers spent about 14% or less of their income on a home. That's because mortgage rates were below 4 percent at the time.

The same happened in the early days of the pandemic. The economy came to a standstill as a result of a surge in household orders and mass layoffs. In an effort to stimulate the economy, the Federal Reserve cut interest rates and mortgage rates fell below 3% for the first time.

These low rates triggered and offset a sharp rise in home prices. As homebuyers paid less in interest payments, they could afford to buy more homes. The result?In the spring of 2020, homebuyers will be spending just under 18 percent of their income on housing.

"Affordability is one of the factors that set off the home-buying frenzy that we saw in the early days of the pandemic," Hale said.

It wasn't until March 2022, when mortgage rates climbed above 4 percent, that homebuyers began to be priced out. That month, they were spending slightly less than 25 percent of their income on housing. As rates climbed and affordability worsened, more buyers left the market and there were fewer homes for sale (because sellers didn't want to give up their low interest rates).

The situation is only going to get worse, with homebuyers spending close to one-third of their income on housing in May.

"It's easy to be tempted to expand your budget when housing prices are unaffordable," Hale said. But with inflation, rising property taxes and high energy bills, "it's probably not a good time to do that."