Lending standards still a wild card for a sustained housing recovery By BARBARA HUBBS A local delegation from the Northeast Tennessee Association of RealtorsR was in San Francisco for a conference late last week where the buzz was about how strong the housing recovery has been. At the same time, there were warnings that some wild cards to the continued recovery are in the wings. Host RealtorsR in the Bay area were glowing over the 32 percent increase they have seen in home prices. While we havent seen that type recovery here, our recovery has been in line with our markets historical margins. The Tri-Cities housing market is sometimes compared to a dull, corporate bond. Instead of recording big spikes and dips that look like an EKG report, it moves along adding equity at a steady, conservative pace. The local market doesnt participate in the real estate booms, so while its not immune to the downturns, it hasnt seen the breath-taking declines other markets saw. The October NETAR Trends Report that will be released later this month shows home sales in our 11-county region are 10.5 percent better than they were during the first 10 months of last year. The average price improved 4.7 percent during the same period. While thats shy of the San Francisco markets numbers, its a solid market gain. During the conference National Association of RelatorsR chief economist, Lawrence Yun, projected sales would be up by 6 percent next year. Thats not bad, but it could and should be better. A recent NAR survey concluded that unnecessarily restrictive lending practices have shut many potential single and first-time buyers out of the housing market and the recovery. Thats not exactly new news. A little over a year ago Yun sounded a similar warning at a briefing for the Northeast Tennessee Association of RealtorsR in Kingsport. Local business and civic leaders also attended the briefing. At that time the focus was on first-time buyers and small-market home builders. Single home buyers have been added to that discussion since then. Single home buyers have been suppressed for the past three years by restrictive mortgage lending standards, which favor dual-income households who are more likely to have higher credit scores, Yun added in one of his many reports on the issue. According to NAR data, in 2010 single buyers accounted for 32 percent of the housing market. It was a stable proportion of the market. But in 2012 and 2013, their market share dropped to 25 percent. First-time buyers have traditionally accounted for about four out of every 10 home purchases, according to NAR. This year their share dropped to 38 percent. Overly strict lending standards are squeezing those two key groups out of the market and thats a cause for concern, Yun says. Historically, first-time buyers are instrumental in housing recoveries because they help existing homeowners sell and make a trade. While theres no hard local data on this issue, local RealtorsR say the number of first-time buyers in the local market is down noticeably. Yun and other housing advocates point out that affordability conditions remain favorable, but consumers need access to safe and sound financing, particularly the 30-year fixed-rate mortgage, and with low down payment options for first-time buyers. Thats certainly the case here in the Tri-Cities where residents can buy an average priced home for less than some of the going rentals - if they get a loan. Yun says the biggest wild card in the continued housing market recovery is new federal regulations on mortgage lending that could disqualify 10 percent of those who can get a mortgage today. He also points out that the current standards have already reduced the number of potential buyers by 10 to 20 percent. The normal standards he talks about are not a return to the anything-goes days that lead up to the recession. There is an unnecessarily high level of risk aversion among mortgage lenders and regulators, although many are sitting on large volumes of cash which could go a long way toward speeding our economic recovery. A loosening of the overly restrictive lending standards is very much in order, he says.
Posted on: Tue, 19 Nov 2013 05:26:51 +0000
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