Credit standards are not tight by historic standards. Compared to the complete lack of enforced standards of the housing bubble, credit is very tight, but compared to what preceded the housing bubble, credit standards have merely reverted to what was normal. Prior to the housing bubble, lenders verified a borrower’s income and made sure the payment burden was manageable to ensure the loan was repaid. Today, lenders are doing the same. The notion of “tight” lending standards stems from the perceived entitlement to free money by people who have dubious repayment prospects. There is little reason to believe lenders will return to their bubble-era ways any time soon, particularly now that the GSEs and the FHA who control more than 90% of the mortgage market are forcing lenders to buy back bad loans when there is the slightest deviation from their standards.
The credit cycle swings between periods of tight credit and periods of loose credit. The periods of tight credit set a standard of stability, and periods of loose credit grow out of the price stability created by the period of tight credit. During the loosening phase, lenders take on more risk and expand loan programs at the fringes. As credit loosens, collateral value rises and lenders have less fear of loss, so they expand their risky offerings further. The continuing expansion of credit becomes self-fueling, and risky and unstable loan programs proliferate. Eventually, the instability of the risky loan programs leads to defaults. The defaults cause losses, and the losses cause a credit crunch. The credit crunch leads to tighter and tighter lending standards until collateral values stabilize and the system starts all over again.
Financial reporters with their optimism bias and the housing bulls looking for any reason to reaffirm their faith in ever-increasing house prices hope to see the beginnings of the next loosening cycle in credit. Unfortunately, credit markets don’t move that quickly. Lenders are still dealing with the loss of trillions of dollars in collateral value from the bad loans they made last time. And since they haven’t been able to escape all responsibility for their losses both past and present, lenders are very cautious about who they loan money to. That isn’t likely to change any time soon. Private money is not ready to fuel another housing bubble, and government-backed mortgages require stringent standards likely to become even more stringent given the huge losses at the FHA and the GSEs over the last six years. No, credit standards won’t be loosening up in 2013.
2013: Mortgage Credit Likely to Remain Restrained
December 20, 2012, 12:22 PM
Credit standards are tight. Yes, the Federal Housing Administration allows borrowers with credit scores of less than 700 and down payments of just 3.5% to buy homes.
Does anyone else see the contradiction in the two sentences above? The FHA allows FICO scores below 600, and a 3.5% down payment provides no cushion for loss in the event the borrower defaults early in the loan period.
But lenders are still scrutinizing property appraisals, reams of income and bank statements, and anything else that could be used to force them to buy back the loan should it default, which means that it is much harder to get a loan than at any time since the 1990s.
In other words, lenders have gone back to doing their jobs because they have consequences for their failures. Amazing how accountability changes things.
Rising home prices could eventually serve as a tailwind for credit.
That’s the delusion of price security lenders rely on. The entire subprime business model with its sky-high delinquency rates depended on rising prices to minimize their default losses. We all saw how that turned out when prices fell.
But it’s not clear how aggressive lenders will be in easing their standards as long as they have plenty of business—which they do right now thanks to heavy refinancing volumes from low interest rates.
There are other factors that are likely to keep restraints on mortgage lending next year.
While there have been some fears in the banking industry that a series of new regulations that are part of the Dodd-Frank financial-overhaul law would further tighten lending standards, a more likely result is that those regulations keep today’s lending rules in place.
In addition, financial troubles at the FHA, which has played an outsized role facilitating new lending, could lead that agency to crack down on lenders and take other steps that make credit more costly at the margins.
The upcoming FHA bailout will almost certainly increase costs on FHA loans and further tighten lending standards. This will become a political firestorm in 2013 as we debate whether to reflate the housing Ponzi scheme with government-backed loans or do we let the so-called housing recovery weaken by raising costs to first-time homebuyers.
Another challenge facing the mortgage industry is that several large banks have reduced their appetite for buying mortgages from smaller lenders, drying up credit for so-called “correspondent” lending. While new players are rushing into the void, they’re not large enough to replace the capacity that has been lost over the past few years. Community banks and credit unions have also ramped up lending and can offer more flexibility, but they’re also too small to move the needle on credit creation.
Big lenders have been reducing their footprint amid growing legal expenses and put-back costs from their legacy loans
The put-back provisions are the primary tool for protecting the US taxpayer from further loss exposure. These provisions are also what keeps credit standards prudent today.
and as new international capital standards are implemented forcing them to hold more capital.
The banks are largely in compliance with the new Basil III capital lending standards.
Banks also aren’t eager to invest in building capacity because origination volumes are likely to fall whenever mortgage rates rise from their current levels, which are the lowest on record.
If originations are likely to fall, why does everyone think sales volumes and prices are going to go up?
Banks have engaged in defensive underwriting for the past few years, scrutinizing any flaws with a loan file to avoid the risk that they’ll have to repurchase the loan from Fannie Mae or Freddie Mac if it defaults. So-called “put-backs” of bubble-era mortgages have cost banks billions of dollars.
Good. Then perhaps they won’t inflate a new bubble doing the same stupid things that inflated the last one.
There are signs that lenders could ease some at the margins, but overall, buyers shouldn’t expect that getting a loan will get easier anytime soon, even though rates probably can’t get much more attractive.
That’s the contradiction of the credit cycle. When interest rates are the most attractive, the borrower pool is the smallest. That is also typically a signal that it’s a good time to buy because as lenders loosen credit standards in the future, more borrowers will enter the market and bid prices up, assuming interest rates don’t rise too far too fast.
Washington May Finally Take Up Mortgage Reform
By Daniel Indiviglio — Posted Monday, Dec. 24, 2012, at 3:41 PM ET
America’s lawmakers may finally take reforming housing finance seriously in 2013. Assuming Congress settles the deficit debate, sorting out the government’s role in funding home loans should be its next stop. And a number of obstacles are dissolving.
U.S. taxpayers are on the hook for at least 90 percent of the nation’s mortgages through Fannie Mae, Freddie Mac and the Federal Housing Administration – a dramatic increase since 2007. But Frannie’s guarantee fees are now so low that private lenders cannot compete to wrest back market share.
Increasing the fee is the simplest policy fix. But that doesn’t wholly address the future role for Fannie and Freddie, which between them needed $188 billion of taxpayer aid to stay afloat. The general consensus is that they should be wound down – even some Democrats and the Treasury are on board.
But there’s no plan of action because the environment seemed too tricky. That’s now changing. The housing market is recovering. Home prices and existing home sales have risen steadily this year while inventory fell to a 10-year low.
Some regulatory certainty is coming as well. The Consumer Financial Protection Bureau should finalize what constitutes a qualified mortgage in January. This will exempt lenders from certain lawsuits. That will then enable the Federal Reserve and five other watchdogs to define the meaning of a “qualified residential mortgage” that will set standards – such as how much equity a borrower has in a property – for prime loans that lenders won’t need to retain a chunk of. New documentation standards will also improve transparency.
So banks and investors should feel comfortable taking on more mortgage risk. Meanwhile, Congress now has an advocate who wants mortgage reform front and center: incoming House Financial Services Chairman Jeb Hensarling.
Some hurdles remain. Industry lobbyists will make a stink about reform. Lawmakers can still make dumb decisions. And any new financing framework is likely to be implemented over several years to avoid a crash. But if lawmakers don’t realize that 2013 is a prime time to take up housing reform, it’s hard to imagine when they ever will.
I doubt Congress will take up GSE reform. The lobbyists representing the parties benefiting the most from the current system will argue that any changes will endanger the housing recovery. They will be right in their assertions, so Congress will kick the can for another year or two. We may see some broad “roadmap” to reform announced by Congress, and that would be a start, but I rather doubt any substantive will be done until the bottom callers become less nervous about their prognostications.
This is why credit standards are tighter today
The former owner of today’s featured property should never have been given her Ponzi loans. She steadily extracted the equity from her property, then she quit paying when the Ponzi money stopped coming. She is the poster child for why standards need to be tighter today.
- This property was purchased for $250,000 on 4/15/1999. The owner used a $237,500 first mortgage and a $12,500 down payment.
- On 10/20/1999, only six months later, she obtained a $30,000 HELOC and extracted her down payment and them some.
- On 1/30/2002 she refinanced with a $260,000 first mortgage.
- On 4/23/2002 she obtained a $46,200 HELOC.
- On 1/30/2003 she refinanced with a $322,700 first mortgage.
- On 10/2/2003 she opened a $79,700 HELOC.
- On 3/1/2004 she refinanced with a $405,000 first mortgage.
- On 6/22/2004 she obtained a $100,000 HELOC.
- On 6/24/2005 she refinanced with a $560,000 Option ARM with a 1% teaser rate.
- Total mortgage equity withdrawal is $322,500.
- She quit paying the mortgage in late 2009, and she has been allowed to squat for three years.
Wouldn't you be embarrassed to overpay by $100,000? Only fools buy houses without knowing neighborhood values. Don't be a fool. Don't suffer the pain of an underwater mortgage. The surest way to lose your house is to overpay for it. Our reports identify overvalued and undervalued neighborhoods. Use it to broaden or narrow your search area. Savvy buyers work with us to find bargains. We've saved thousands from financial ruin. Let us save you too. If you want peace of mind while shopping for your next home, sign up for our monthly market newsletter.
We're sorry, but we couldn't find MLS # S721244 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
Proprietary OC Housing News home purchase analysis
18132 ROMELLE Ave Santa Ana, CA 92705
$465,000 …….. Asking Price
$250,000 ………. Purchase Price
4/15/1999 ………. Purchase Date
$215,000 ………. Gross Gain (Loss)
($37,200) ………… Commissions and Costs at 8%
============================================
$177,800 ………. Net Gain (Loss)
============================================
86.0% ………. Gross Percent Change
71.1% ………. Net Percent Change
4.5% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$465,000 …….. Asking Price
$16,275 ………… 3.5% Down FHA Financing
3.41% …………. Mortgage Interest Rate
30 ……………… Number of Years
$448,725 …….. Mortgage
$115,323 ………. Income Requirement
$1,993 ………… Monthly Mortgage Payment
$403 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$116 ………… Homeowners Insurance at 0.3%
$467 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
============================================
$2,979 ………. Monthly Cash Outlays
($294) ………. Tax Savings
($717) ………. Equity Hidden in Payment
$17 ………….. Lost Income to Down Payment
$136 ………….. Maintenance and Replacement Reserves
============================================
$2,122 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,150 ………… Furnishing and Move In at 1% + $1,500
$6,150 ………… Closing Costs at 1% + $1,500
$4,487 ………… Interest Points
$16,275 ………… Down Payment
============================================
$33,062 ………. Total Cash Costs
$32,500 ………. Emergency Cash Reserves
============================================
$65,562 ………. Total Savings Needed
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
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28 Responses to “Credit availability will get even tighter in 2013”
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“I doubt Congress will take up GSE reform. The lobbyists representing the parties benefiting the most from the current system will argue that any changes will endanger the housing recovery.”
100% agree. In fact, I think they will use Fannie and Freddie to somewhat replace FHA that is going to need a bailout. They are marketing it as “new products” with higher fees that Fannie and Freddie can charge.
Prices expected to fall in 1/3 of nation’s housing markets in 2013
The national housing market has hit bottom and is now “in full recovery mode,” according to Veros Real Estate Solutions, a provider of risk management and valuation services.
The company forecasts a 1.2 percent rise in prices in the nation’s top 100 markets over the 12 months ending in December 2013.
While there remains—as always—some variance across markets, Veros predicts prices in two-thirds of all markets across the nation will either remain flat or rise over the next 12 months. This is the first time since the recession that Veros has forecast gains (or at least no declines) for this large a proportion of markets.
Markets expected to depreciate over the next 12 months will likely experience declines of 2 to 3 percent
Foreclosures still three times normal: Corelogic
Fewer homes were added to foreclosure inventory in November as short sales become a more common tool to prevent foreclosure, according to a recent CoreLogic report.
Data from CoreLogic revealed 55,000 homes were lost to foreclosure in November. The figure represents an 18 percent decrease from November 2011 and a 6 percent decrease from October’s upwardly revised 59,000.
“The pace of completed foreclosures has significantly improved over a year ago as short sales gain popularity as a disposition method,” said Mark Fleming, chief economist for CoreLogic, in a release. “Additionally, the inventory of foreclosed properties continues to decline while the housing market demonstrates an ongoing ability to absorb the distressed sales that result from completed foreclosures.”
Although foreclosure inventory is shrinking, the number of completed foreclosures is still high compared to pre-crises levels.
Before the housing market decline in 2007, CoreLogic noted completed foreclosures averaged 21,000 per month between 2000 and 2006. Since September 2008, about 4 million homes have been lost to foreclosure, according to CoreLogic.
The states that saw the highest number of completed foreclosures in a one-year period ending in November 2012 were California (102,000), Florida (94,000), Michigan (75,000), Texas (58,000) and Georgia (52,000). The five states alone account for half of all completed foreclosures.
The state with the highest foreclosure inventory rate as a percentage was Florida, which led with a rate of 10.4 percent. New Jersey’s foreclosure inventory rate of 7.3 percent gave it the second highest ranking. Other states in the top five were New York (5.1 percent), Nevada (4.7 percent), and Illinois (4.7 percent).
Two metros with notably high foreclosure inventory rates were found in Florida. Tampa had a rate of 10.9 percent and Orlando a rate of 10.5 percent.
Fed: Mortgage rates won’t get much lower
FORTUNE — If you are looking to refinance your mortgage, this is close to the best deal you’re going to get. That’s the message from two economists at the New York Federal Reserve.
That contradicts what some have been saying for a while. In fact, observers have been flummoxed about a split between home loans rates and mortgage bonds. While the latter has continued to drop, mortgage rates have been stuck in the mid-3% range. Based on prices for mortgage-backed securities, home loan rates should have hit 2.6% by now.
The two Fed researchers, Andreas Fuster and David Lucca, though, say in a blog post that their research suggests it’s unlikely mortgage rates will ever get that low. They say there is a possibility that rates may make it down to 3%, but that would require some pretty significant policy changes, and even those changes aren’t guaranteed to produce a 3%, or lower, mortgage rate.
So why haven’t mortgage rates fallen further? The New York Fed has been trying to figure that out. And Fuster and Lucca’s blog post is based on a conference the NY Fed held last month on the topic. Unfortunately, most of what came out of the conference, and therefore Fuster and Lucca’s recap, is unsatisfying. The economists do a good job of dispelling some myths, namely that increased regulation from Dodd-Frank or the Basel III reforms from international bank regulators are pushing up mortgage rates. Higher capital requirements have depressed the value of mortgage servicing rights, one of the ways banks book profits from home loans, but not enough to cause rates to go up.
Instead, the researchers’ main conclusion is that there are fewer mortgage brokers than there were before the housing bust and financial crisis, and that more competition would bring down rates. But it’s not clear even that is the answer.
They’re not lower because they don’t need to be lower. There’s plenty of demand at 3.3%, and why would a broker sell a loan for a lower yield unless he had to?
Democrats have the most amazing capacity for schizophrenic thinking. When it comes to the fiscal side of things, they’re all about demand. The only way to get the economy cooking again is to stimulate it! Borrow (or steal) capital from the rich and shove it into the sweaty hands of the desperately poor, who’ll run out and spend it on booze, online pr0n and Happy Meals, thus priming the mighty engines of commerce.
But when it comes to monetary policy, they’re all about supply. Gee, we’ve supplied oceans of low-priced capital, why aren’t people borrowing like drunken sailors?
You’d think the logical-consistency fuse in their heads would blow. Wait a minute, it can’t be pure demand when we talk budgets, and pure supply when we talk about money supply…maybe…d’you suppose there’s aspects of BOTH supply and demand in all macroeconomic situations…?
Nah. Somebody jumped that fuse with a piece of wire long ago.
NO! Not if it doesn’t fit my political narrative and goals…
‘Carnage’ in MBS-land yesterday. No doubt lots of prospective OC ‘serfs’ who floated a rate got blindsided.
Something is going on.
Beware the bond bubble in 2013
By Hibah Yousuf | CNNMoney.com – 11 hours ago
After three decades of declines, interest rates are near rock bottom, and many Wall Street experts think the bond bubble may be about to burst.
In fact, nearly 40% of the 32 investment strategists and money managers surveyed by CNNMoney think that interest rates will begin to rise in 2013, and another 30% say the shift will begin in 2014.
That would be even sooner than the Federal Reserve’s projections. The central bank doesn’t expect to raise the federal funds rate, the key interest rate that influences overall interest rates, until some time in 2015. The Fed said last month that it will keep its stimulative policies in place until the unemployment rate falls to 6.5%, which it doesn’t think will happen before then.
“Like it’s been in the case of Japan, low interest rates can go on much longer than expected, but right now it seems that all the stars are aligned for interest rates to rise,” said Jeff Weniger, senior investment analyst at BMO Private Bank. “But ultimately, whether it happens in 2013, 2014 or 2015 doesn’t matter too much. What matters is that you’re not invested in bonds when they do rise.”
That’s because investors could get stuck with big losses if they wait to sell until after rates rise, since the value of bonds decline when interest rate move higher.
The threat is especially worrisome for individual investors, who have been rushing into bond funds while fleeing the stock market in search of safety and the preservation of capital in the aftermath of the financial crisis.
According to fund flow tracking firm EPFR, individual investors have plowed nearly $210 billion in bond mutual funds and ETFs since the beginning of 2008, while yanking almost $700 billion out of U.S. stocks. In 2012 alone, investors added more than $90 billion to bonds, while pulling more than $150 billion from stocks.
Plus, the fact that the bond market has become so crowded is a danger in itself, said Ryan Detrick, senior technical analyst at Schaeffer’s Investment Research.
“Bonds are definitely an area we would lighten up exposure,” he said. “If we’ve learned anything over the past 100 years of market history, it is that when the crowd thinks one way, you might want to go the other way. Should you have some bond exposure? Yes. But should you be overweight bonds? Absolutely not.”
Experts are most worried about bonds with longer maturities, and advise investors to shift into shorter-term notes, or into debt that offers floating rates — those that would rise along with the market.
While most of those surveyed by CNNMoney believe the bond bubble could begin to deflate this year, others say interest rate increases are a ways off.
“Signs of economic growth could lead to transitory spikes in rate over the next few years, but a steady climb in interest rates seems far out on the horizon — 2015 or 2016,” said Dorsey Farr, partner at French Wolf & Farr. “We do not expect durable, robust growth or inflationary pressure until at least 2015, which means short rates will likely remain low through then, and long term rate may actually come down from current levels.”
Others have an even longer timeline.
“For over 30 years investors have been worrying about rising interest rates and they have been steadily wrong,” said Craig Callahan, president of ICON Advisors, who said rates could potentially remain low for another decade.
The bond bubble will burst, it’s only a matter of when. I think we may have another year or two of good returns on long-duration bonds, but when the bubble bursts, it will be very ugly.
Yesterday, there were 2 developments that hit the airways. Simultaneously. Coincidence? Ha!
1) Bill Gross yapping about growing inflation
2) The fed’s press’r–minutes released from its Dec meeting noting growing dissension re: QE infinitas.
Question is…
1) does this ”coincidence” signal rates are moving-up due to true inflation finally taking-root (thus PIMCO and the fed begin to offload bond holdings/book profits)
or….
2) are these two entities bluffing (really holding) and are merely attempting to flush-out weak hands so they can buy more bonds at today’s/tomorrow’s cheaper prices.
At this point, the ‘numeraire’ thinks it’s #2.
Stay tuned…..
Larry:
Theoretical scenario:
Lets say the guys who really know the bond market (ie. Bill Gross / PIMCO) say that there is 2 good years left.
Would not the banking/industrial complex time the selling of *ALL* shadow inventory they are holding on the books to coincide with the bitter end?
Of course, the bankers would like to stretch the bullish bond market out for as long as possible.
That way, (as you have pointed out) would allow them time to dump inventory and maximize the back-filling of their losses.
I know I am currently in the minority, but I am still bearish on the local market precisely because of scenario as described.
If this all comes to pass, then to me then the currently R/E upturn on the charts would go down as one of the biggest head-fakes in the history of the world.
“It’s tough to make predictions, especially about the future” – Yogi Berra
If rates go up quickly, this will become an enormous head fake. The 2009-2010 headfake was relatively easy to spot because the stimulus had a defined endpoint, and the consequence of removing the stimulus was obvious.
If this recent rally becomes a headfake, it was much more difficult to predict because Bernanke promised unlimited stimulus for as long as it takes to make housing recover. If Bernanke is unable or unwilling to keep his promise, the housing market will roll over again, and all the bottom-callers who ignored the impact of the artificial stimulus will look pretty stupid.
The Fed will put on the brakes with purchases sooner than expected …..only thing is that it wouldn’t be publicized
http://federalreserve.gov/monetarypolicy/fomcminutes20121212.htm
I wonder why they didn’t indicate people names? Honestly, I hope this is real, not some headfake.
“In considering the outlook for the labor market and the broader economy, a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted. “
Would any reasonable person float a rate right now? Wells Fargo didn’t even charge me a lock fee last September for a 90-day lock.
I actually know someone that got a 5 arm. And he’s a financial planner! PS I don’t use him, I stick to index funds.
Brilliant guy. What are the chances that mortgage rates will be lower five years from now? About zero, I imagine.
“I can save money on my mortgage then invest the savings and more in the stock market or other investment vehicles. My mortgage is less than 3%, but my returns will be greater than 10%” In 10-12 years will be able to pay off most of my mortgage.”
I didn’t have a response.
So he is going to pay 3% on a $500,000 mortgage with the likelihood of higher future rates so that he can invest $500 per month in an investment earning 10%? A fractional increase in his mortgage will completely wipe out any return on the investment because the basis is so much larger.
I would far rather lock in a fixed rate on a $500,000 loan than hope for some arbitrage profits on a small investment.
he probably moonlights as a part time realtor as well
If he plans to move in 5-7 years, then it was a great move on his part. Paying more for a 30 year fixed makes absolutely no sense unless you plan to stay for the long haul and not pay your mortgage off early.
Key word being ”reasonable”.
This is the Rime of the Ancient Mariner…water water everywhere, but not a drop to drink. Interest rates have not been lower in decades, but capital has not been tighter in a long time…so the potentially beneficial effects of low interest rates are not accessible to much of the population.
This is the one glimmer of sanity in our insane housing market. Sure, there are people who paid too much or took out a ton of “equity” in the past decade, and now they see low rates as an opportunity to cut and run. But if buyers don’t have the income, and the house doesn’t appraise, no deal. In my hood there’s a seller who’s asking $850k for a decent 3/2 house. It’s been in and out of “pending” a couple of times now. Similar houses have recently sold in the low- to mid-700s (which I also think is insane). Sure, there are idiots who might want to pony up for that kind of real estate, but no appraisal or ability to pay means the house will fester on the market for months.
We will see a lot of that in 2013 as the organic sellers return with their WTF asking prices that won’t appraise. 2013 will see significant inventory recycling as these organic sellers are in and out of escrow many times.
A Mortgage Bond Boom Isn’t a Housing Recovery
By Mark Gimein
The new issue of Bloomberg Markets magazine looks at the year’s best-performing hedge funds. Topping the list are several that have invested in mortgages, led by the 38 percent return at Deepak Narula’s Metacapital. Within this winning category there are funds that invest in Fannie and Freddie-backed mortgages, and (believe it or not) in subprime. For everything there is a price and a time.
Housing has risen this year, with a 4.3 percent gain in the S&P/Case-Shiller home price index. As is usually the case with housing, it doesn’t take much for the word “recovery” to start getting tossed around. Don’t confuse mortgage bonds with housing. The Big Picture’s Barry Ritholtz has several times charted the long run view of home prices, and they’re still above the historical average relative to household income. (Standard & Poor’s Co.’s David Blitzer shows them slipping below historical norms compared to per capita income; with changing family sizes, that’s the wrong measure.)
Narula gives some detailed insight into his strategy, and it’s worth reading for the view it affords not only into his fund, but into the housing economy. He’s gained with bets that mortgages would rise relative to Treasury bonds, and that fewer debtors would be able to refinance than the U.S. government hoped.
That reveals some painful truths about the housing recovery. Low rates have made housing relatively more affordable … for those who haven’t been locked out of the market by credit standards that are much tighter than they were even before the housing boom. The winners in a concerted Federal effort to keep housing afloat are banks, investors, and the limited group of homeowners who’ve been able to finance purchases at low rates.
The losers, on the other hand, are those who have cash but little creditworthiness, or those who buy homes expecting they will steadily gain value over the next decades. In the short term, the government has given banks and mortgage investors a comfortable cushion. For housing over the long term, it looks like less of a soft landing than a long slow descent.
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