Paul Dales, top economist for Capital Economics Ltd. commented recently about the improving housing market, saying, “The bottom is behind us. I don’t think we will return to anything like the exceptional booming market we had five years ago (but) we will have a very steady, slow recovery, but a recovery nonetheless.”
There are several indicators which point to the healing of the housing market, one of which is the loosening credit standards. Another indicator is the rise in availability of credit. There are good examples of this, one being a new
initiative from the White House announced this past Tuesday, in which homeowners holding FHA loans and looking to refinance into another FHAloan via the FHA Streamline Refinance program will pay all of .01% in upfront mortgage insurance premium (UFMIP). This is a staggering 99% discount off the current UFMIP. These types of initiatives bring about needed relief as well as more cash into the market, which in turn spurs assistance to a sputtering economy.
“The bottom is behind us. I don’t think we will return to anything like the exceptional booming market we had five years ago (but) we will have a very steady, slow recovery, but a recovery nonetheless.”
Paul Dales, Economist for Capital Economics Ltd.
Banks are also loosening loan-to-value ratios, commonly referred to as LTV, which Dales sees as “the clearest sign yet of an improvement in mortgage credit conditions.” Credit data from CreditForecast.com (backed by Equifax and Moody’s Analytics) indicates that consumer credit patterns are returning, or have returned, to pre-recession levels. This is a positive sign for the housing market, which is exhibiting incremental progress that points to increased traction in the coming months.
In spite of the good news on the loosening of credit availability, borrowers must still contend with tight documentation and underwriting guidelines. Underwriters who, in the past, could review six to seven loan files a day are now doing two to three, even when borrowers are considered “prime.” The takeaway is this: if you are thinking about purchasing a new home, ensure yourself of a good negotiating position by securing your loan commitment early in the process and consult with your real estate professional to help you in navigating the homebuying process.