Signs of Thawing in the Housing Market

by Rob Chrisman (The Mortgage Reports)

Maybe it is merely Spring Fever, or maybe there is a trend emerging that consumer spending is increasing on housing and housing-related items. Of course, it is nearly impossible to pick the top or the bottom of a cycle, but there are certainly good signs out there.

Credit data from CreditForecast.com (backed by Equifax and Moody’s Analytics) indicates that consumer credit patterns are returning, or have returned, to pre-recession levels. Delinquency rates for auto, bankcard, and consumer finance are back to pre-recession levels, and any good news with regard to these sectors is a positive for the economy. The housing market is exhibiting incremental progress that points to increased traction in the coming months, and certain areas are actually doing well.

That being said, the home mortgage lending sector continues to see the highest percentage of delinquencies. Mortgage rates, however, continue to be very low compared to historical standards, and the government’s moves promoting refinancing programs are bearing some fruit.

The HARP 2.0 program is an example of this.

Borrowers, however, must still contend with tight documentation and underwriting guidelines. Underwriters who, in the past, could review 6-8 loan files a day are now doing 2-3, even when borrowers are considered “prime.” Consumers that fit the bill of a prime risk (credit score above 700) now account for more than 80 percent of all new mortgage originations.

Yes, progress is spotty, and there is still plenty of bad news upon which to focus. But in terms of housing and the mortgage industry, everyone could use some thawing out from the winter we’ve been in for years.