Home News Here’s the loophole that makes the U.S. housing market more wobbly than it appears

Here’s the loophole that makes the U.S. housing market more wobbly than it appears

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This housing market does not appear to be built on the same eerie foundation as the subprime crisis.

Consider these stats from Fannie Mae
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A mortgage buyer backed by the US government. The weighted average FICO credit score for a single house in the first quarter was Sterling 748. Origination loans to value were 71%, and only 4% of homes had loans worth more than 95%. The percentage of buyers with a debt-to-revenue ratio above 43% (usually the point at which lenders become more sophisticated) was 29%.

I don’t like the times when I have no income, no work, no assets. But it ignores rising house prices.

As an example, an anonymous blogger named SoldAtTheTop looked up home prices in Boston. Bloggers have calculated home prices as if they were continuing the trend for the eight years prior to 2019. The author found that if prices returned to a more normal trend, Average loan-to-value for tracked jumbo loan samples jumps to 92% From about 70%. According to CoreLogic, jumbo mortgages were too big to be supported by Fannie Mae and Freddie Mac, and securitization rose to its highest level in 14 years last year.

“The loopholes in the lending criteria for this cycle were simply ignored, given the fact that housing valuations couldn’t accurately explain the anomalous price increases that occur in the market, or that borrowers came to the table at 20%. That’s it. We had a 30% deposit and a good credit history, “the author writes.

“I think my little sample clearly shows something important about the dynamics of the housing market in this cycle: the actual performance that comes from the prime lending market, especially when it comes to privately funded jumbo loan performance. , There are systemic risks that have not yet been fully realized, “said the blogger.

Indeed, the fact that prices are overcooked compared to history does not mean that they will soon return. The first victims of rising mortgage rates were housing transactions, not prices.

According to CoreLogic, home prices in May were still up 20% year-on-year, while pending home sales were down 14% year-on-year.However, the forecasting company’s capital economics U.S. home prices will soon begin to fall, About 5%. Still, as long as the US labor market is strong and owners can continue to pay monthly, falling prices will not be immediately catastrophic for jumbo mortgage owners.


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