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Another Reason for the Housing Crisis Coming to an End in 2012 (Banks are Loosening Credit Standards)!!

According to a recent article in DS News and real estate agents all over Dallas….

Capital Economics expects the housing crisisto end this year, according to a report released Tuesday. One of the reasons: loosening credit.”

Tons of articles have been published recently about the housing crisis coming to an end, but I can feel it in my bones and am witnessing it all over the place.  I barely had time to write this blog post because this week has been so crazy busy with buyer and seller clients!! It’s fantastic. Everyone up at the office is crazy busy. Even my friends in Commercial real estate have been talking about the booming Spring market. I’ve got one client in commercial real estate who is trying to sell and buy a home, but he is so damn busy with new deals, that it has been tough to get enough time to have a conversation about the houses he likes…. so, you can only imagine how difficult it is trying to schedule time to go look at houses on the market. It’s great…. but more about this article:

“The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Credit Scores

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.”  – Article, Courtesy of Krista Franks Brock of DS News.


Loans (Photo credit: jferzoco)

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