Although current mortgage rates—which hit 8% this week—mimic the early 2000s, the overall housing market is actually more reminiscent of the 1980s, according to a new report by the chief economist for the Fortune 500 financial services company First American. 

“Today’s housing market isn’t anything like the housing market of the mid-2000s,” Mark Fleming, chief economist at First American wrote in a Tuesday report titled “1980s Déjà Vu for the Housing Market.” Of course, Fleming was dismissing the ghost of the housing crash of 2008 that precipitated the Great Financial Crisis, when subprime mortgages and other shoddy lending practices were common. Today is just fundamentally different, he wrote: “The housing market today is not overbuilt, nor is it driven by loose lending standards, sub-prime mortgages, or homeowners who are highly leveraged.”

“However,” he added, there is another precedent: ”the current housing market is similar to the market of the 1980s.” That could be a tough pill for millennials to swallow, considering they largely blame baby boomers for their inability to purchase a home in today’s market since they’re holding onto homes longer out of fear of high mortgage rates—and are swooping in with all-cash offers that can’t be matched by their younger counterparts. 

Fleming cited three key ways the economy and housing market of today seem to “rhyme” with that of the 1980s, noting that both periods featured high inflation, rising interest rates, and a boom of homebuyers coming of age. These three factors could create a similar “housing recession” to the one four decades ago, Fleming argues—one where home sales stay low in a frozen, unaffordable market, but home prices merely stagnate.

“History doesn’t repeat itself, but it often rhymes,” Fleming wrote in a Mark Twain–ish flourish.

Demographic changes

In the late 1970s and early 1980s, demographics helped sustain the housing market even amid stubborn inflation and aggressive interest rate hikes from then–Federal Reserve Chairman Paul Volcker. Millions of baby boomers came of homebuying age, leading to a wave of steady purchasing demand during the decade.

Now, in a strikingly similar pattern, millions of millennials are hitting the prime age this decade to buy a home, and Fleming believes that could help support home prices. 

“Demographic demand against a severely limited supply of homes for sale continues to put a floor on how low prices can go, but sales suffer as potential buyers are priced out and existing homeowners see no incentive to sell,” he wrote Monday.

Millennials now comprise the biggest share of the “homebuying pie,” as Redfin puts it, purchasing about 60% of homes bought with mortgages during the past few years. 

And as Fortune previously reported, Fleming isn’t alone in concluding that this demographic wave should support home sales and prices despite rising mortgage rates. Fleming sounds an almost identical note to Bank of America Research’s U.S. economist Jeseo Park, who wrote earlier this month: “Some sales activity should be supported by millennials reaching the prime homebuying age, and single-family building permits have steadily held up. This can help the housing market retain some of its momentum without falling apart.”

Inflation and high interest rates

After he took office in August 1979, Fed chair Paul Volcker fought to control inflation through aggressive interest rate hikes, leading the average 30-year fixed mortgage rate to surge to a peak of roughly 18% by late 1981. The spike in borrowing costs caused home affordability and sales to plummet in the early ’80s. And after years of rising home prices, the housing market stalled out, but it didn’t crash—due in large part to demographics. 

At the start of Volcker’s term as Fed chair, the median U.S. home sales price was $64,700. And even after a near doubling of mortgage rates, that figure rose to $69,400 by the second quarter of 1981.

Similarly, over the past 18 months, the Fed has rapidly raised interest rates to combat inflation, after it hit a four-decade high of over 9% last year. And even after a rapid drop in inflation this year, the central bank’s chair Jerome Powell has taken the stance that inflation remains “too high” and interest rates may need to remain higher for longer as a result.

“Although inflation has moved down from its peak—a welcome development—it remains too high,” Powell said in late August. “We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.” 

As a result of Powell’s hawkishness, some economists and housing experts fear that mortgage rates could stay at or above 8% this year and early next.  

The impact on the housing market from rising mortgage rates has been reminiscent of the 1980s. Both back then and today, housing affordability and existing-home sales plummeted amid increased borrowing costs and high home prices.

For example, existing home sales dropped almost 50% between 1978 and 1982, according to the Office of Policy Development and Research. While today, at their current pace, total existing-home sales are projected to amount to 4.1 million in 2023, a significant drop from the more than 6 million home sales in 2021, according to National Association of Realtors data. 

And soaring mortgage rates have pushed the average monthly payment on the median priced home in America up $670 or 38% over the past 12 months alone, according to Morgan Stanley’s calculations.

In turn, the housing market today also faces a potential recession akin to that of the early 1980s, according to First American’s housing recession indicator. Again, that doesn’t necessarily mean home prices will fall sharply, however. Experts expect more of a frozen housing market, then potentially a collapse similar to the disaster in 2008.

First American uses factors such as average hourly earnings of construction workers; the total number of employees in residential building and real estate rental and leasing; the number of single-family housing starts; existing home sales; and more to determine whether the housing market is currently in a recession. 

“Because mortgage rates have increased further in October, we expect the housing recessionary conditions to linger in the near term,” Fleming concluded based on the recession indicator, noting that “the housing market did rebound from the 1980s, but it took some time inflation and mortgage rate stabilization were key.” 

Beyond Park and Fleming, a Morgan Stanley team, led by strategist James Egan, also warned in a Tuesday research note that if mortgage rates remain elevated for too long and home inventory rises even slightly, that could lead to a 5% drop in home prices by the end of 2024 in a bearish scenario.

“The longer-term impact to demand if rates remain at 8% should not be ignored,” he wrote.