No Bubble Here! How Mortgage Standards Are Helping

Real estate is shifting into a more normal market pattern. The days of national home appreciation topping 6% annually are over. Inventories are increasing which is causing bidding wars to almost disappear. Some see these as signs that the market will soon come tumbling down as it did in 2008. There is no bubble here! New mortgage standards in place are helping. As it becomes easier for buyers to obtain mortgages, many feel that this is proof that banks are repeating the same mistakes they made a decade ago. I want to assure everyone that we are not heading to another housing “bubble & bust.” Each month, the Mortgage Bankers’ Association (MBA) releases a measurement which indicates the availability of mortgage credit known as the Mortgage Credit Availability Index (MCAI). According to the MBA:

“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.).” *

The higher the measurement, the easier it is to get a mortgage. During the buildup to the last housing bubble, the measurement sat at around 400. In 2005 and 2006, the measurement more than doubled to over 800 and was still at almost 600 in 2007. When the market crashed in 2008, the index fell to just over 100. Over the last decade, as credit began to ease, the index increased to where it is today at 186.7 – still less than half of what it was prior to the buildup of last decade and less than one-quarter of where it was during the bubble. Here is a graph depicting this information (remember, the higher the index, the easier it was to get a mortgage):

Bottom Line

Though mortgage standards have loosened some over the last few years, we are nowhere near the lax ways that helped create the housing crisis ten years ago. More mortgage products are available for different needs but I know of no lenders doing the "stated income" loans of the past.   Call me, I'll be happy to put you in touch with one of my preferred lenders. Any of them would enjoying talking to you about what loan product may best suit your needs. 941-270-0539