With millennials reaching home-buying age, the housing market is shaping up for a rerun of the 1980s.

Millennials—also dubbed “echo boomers” in the housing context—are encountering the same conditions as their parent generation, says a new report from the chief economist of First American, a Fortune 500 insurance company.

According to the report, today’s economy has the makings of a 1980s-style prolonged housing recession with features like persistent inflation, high interest rates, and low housing supply, with stagnant home prices likely on the way.

First American chief economist Mark Fleming writes: “Since millennials are ‘an echo’ of the baby boomers and are currently aging into their prime home-buying years, the demographic picture in the early ‘80s mirrors today’s housing market.”

As baby boomer baseball favorite Yogi Berra would say, "It's like déjà vu all over again."

A locked-in housing market supply

Millennials are a sizable group like their parents’ cohort because American birthrates boomed from 1981 to 1996, much as they did between 1946 and 1964.

There were an estimated 72 million millennials, and about the same number of baby boomers, in 2019. Meanwhile, there are around 65 million Gen Xers and some 69 million Gen Zs.

As a result of their larger numbers, the original baby boomers faced shortages in housing supply as they came of home-buying age in the 1980s.

Fleming says it’s happening again for millennials in the 2020s.

“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 explained.

Another parallel is high and rapidly rising mortgage rates that are keeping buyers out of the market while locking in would-be sellers.

Fleming writes, “The combination of reduced affordability and an even stronger rate lock-in effect is likely to continue to suppress home sales because you can’t buy what’s not for sale, even if you can afford it.”

The 30-year fixed rate mortgage has been closing in on a painfully high 8% rate since August.

Inflation and high interest rates

In addition to similar demographic pressures, a backdrop of higher inflation could push mortgage rates even higher than 8% in the coming years.

During the 1970s and ‘80s, the Fed punched up its benchmark rate to a record 18% to tame rising inflation, exploding interest costs for borrowers.

Fleming recalls the dire financial situation for new home buyers back then: “As a result of tighter monetary policy and higher inflation, mortgage rates increased to a peak of 18 percent in 1981 [...] Existing-home sales fell nearly 50 percent from the peak in 1978 to the trough in 1982, before rebounding alongside lower mortgage rates.”

Meanwhile, the widening gap between millennials’ income and the soaring costs of home ownership is taking home affordability back to near 1981 levels.

On the brighter side, the 1970s and early 1980s housing recession didn’t last forever. Fleming says that stabilizing inflation and mortgage rates “were key” to a recovering housing market.