Investment News – Housing crisis: Is the end in sight?
If you follow the 18 year property cycle then 2012 is the year that it will end as it's been 14 years up and 4 years down (even though it hasn't been 4 years down it was 1 year down and 3 years across). Nonetheless, any year across is still a down year because of inflation. If you want to understand more about the property cycle, watch the short video above.
‘Housing Crisis to End in 2012 as Banks Loosen Credit Standards'
dsnews.com: by Krista Franks 24th Jan 2012
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.
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 stabilisation 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 generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.
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