The Real Estate Market is shifting and becoming more normal. The days of national home appreciation topping 6% are over. Inventories are increasing and this is causing bidding wars to become a thing of the past. Some analysts see these as signs that the market will crash as it did back in 2008.
Yes, it has become and is becoming easier for buyers to obtain mortgages. The Zero Down Loan is a huge help for many first time buyers who have not been able to save the traditional 20%. This allows buyers to receive as much as 3.5%-5% as a gift for a down payment and it does not have to be paid back. It is easier to qualify than you might think.
Yet, many are suggesting that this gives rise to even more proof that the banks are repeating the same mistakes they made 10 years ago.
A Housing Bubble is Not Happening.
The Mortgage Bankers’ Association (MBA) releases a monthly measurement indicating the availability of mortgage credit. This is 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.).” *
Based on their report,the higher the measurement, the easier it is to get a mortgage. Just before the last housing bubble, the measurement was set at about 400. In 2005 and 2006, the measurement more than doubled to over 800 and was still at almost 600 in 2007. When the market burst in 2008, the index fell to just over 100.
During the last decade, credit began to ease. The index increased again to where it is today at 186.7. That is still less than half of what it was prior to the buildup from 10 years ago and a quarter of where it was during the bubble.
Check out this graph. Remember, the higher the index,the easier it is to get a mortgage.
The Bottom Line
During the last few years, mortgage standards have loosened a bit. Still, we are nowhere near the standards that lead to the housing crisis a decade ago.
*For more information on the MCAI, including methodology, FAQs, and other helpful resources, please click here.