These two stories hit my inbox this morning:
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes â€œthe clearest sign yet of an improvement in mortgage credit conditions.â€
The key take-away is home prices still have not bottomed in most areas. Moreover, nothing stops a renewed decline in those 8% of areas that did not decline.
Once there is a bottom, and we are certainly closer to a bottom than a top, expect home prices to generally languish due to immense shadow inventory, anemic wage growth, anemic job growth, boomer downsize demographics, and most importantly psychology.
I’m thinking the truth is probably somewhere in the middle of these stories.