With home values in North Park and other neighborhoods in San Diego appreciating at record rates, some people think we may be heading for an additional housing bubble; just like the one, we went through about 10 years ago. Some of the blame of that housing boom and bust was the loosening of standards of lending for mortgage credit.
In the University of North Carolina there was a study done after the crisis that revealed the following:
“Lenders began originating massive numbers of high-risk mortgages from around 2004 to 2007, and loans from those vintage years exhibited higher default rates than loans created either before or after.”
A study completed by John V Duca, John Muellbauer and Anthony Murphy revealed the housing crisis was caused by those risky mortgages.
“Our findings indicate that swings in credit standards played a major, if not the major, role in driving the recent boom and bust in US house prices.”
How does mortgage lending from 2004 to 2007 compare to today’s lending for mortgages?
Mortgage Standards are tracked by the Mortgage Bankers’ Association through appreciating at record rates(MCAI) The lending standards are tightening as shown in the decline indicated in the MCAI, although loosening of
credit is also seen in the increases in the index. The chart below shows that we are nowhere near the standards that aided the housing bubble, although, you can see the index going back to the time between 2004 and 2007 when the housing bubble was caused by the loose standards.
Mortgage standards today have become very tight in some areas. There are many qualified home buyers out there having a hard time getting a mortgage. If you have been thinking of buying a home but are not sure how this all works, contact the McT Real Estate Group right away. We will be able to sit down and go over a comprehensive plan of action with you that is in line with your goals.