“Cheap” vs. “Easy” Credit

Housing Market Finance, Then & Now

“If you don’t have a job — or are afraid of losing one — it doesn’t matter how low interest rates are.”

–Ross Kaplan

Long before there was a housing bubble (seemingly, 3 lifetimes ago), there was a credit bubble.

As a result, seemingly anyone who could complete a mortgage application — and millions who couldn’t — got a mortgage.

Or several.

The result was a historic run-up in prices, followed by a historic collapse, inexorably followed by millions of foreclosures nationally and a very nasty Recession.

2018 Credit Environment

Cue today’s housing market, where many nervous Buyers fret that they’re buying near the top.

How reasonable is that fear?

While bubbles are only obvious in retrospect, there is a fundamental difference between credit conditions then and now.

With mortgage rates today rising but still below 5%, credit can still be characterized as historically cheap.

However, underwriting standards are anything but lax.

Don’t believe me?

Just ask anyone who’s applied for a mortgage recently.

That quality control makes it far less likely that today’s homeowners have gotten in over their heads — and far less likely that the next downturn (and there eventually will be one) will result in a wave of foreclosures, undercutting housing prices.

See also, “Anxious 2017 Buyers Fret: “Is Another Housing Bubble Brewing?”



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