 | Is Housing Healthier Than It Appears? Are Mortgage Lenders Loosening Up? |
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| Posted Under: Home Sales • Housing |
Clearly, tight credit has held back housing in recent years. Both markets, and regulators, bounce from one extreme to another – from too loose to too tight over the course of economic cycles. These days, if you do not have a credit score north of 720 and are able to put down 20% it remains tough to get a mortgage.
The market responded and all-cash buyers skyrocketed to about 30% of all existing homes sold over the past few years, up from just about 10% of the total sales before the bust.
But in August 2014, all-cash transactions suddenly fell to 23%, the lowest share of sales since December 2009, while non-cash (or, financed transactions) surged to 77% of the total. We wonder if this is a sign that lending standards may be easing? We think it might.
As the chart above shows, overall existing home sales (blue line) have bounced off the recession low, but have clearly remained subdued. Existing home sales are down 5.3% from a year ago and are down 6.1% from the peak in July last year.
But, let's break it down. Cash sales peaked in September 2013. But financed sales (sales that used a loan) have risen for six consecutive months, are up 7.3% from a year ago, and are at the highest level since November 2009, back when sales were artificially inflated by the $8,000 homebuyer tax credit.
So, as cash sales flattened, and then fell, financed sales have picked up the pace. We would argue that this "core" housing market shows new signs of life in 2014. In other words, the housing market is getting healthier and if lenders are indeed finally easing mortgage credit, we believe home sales could show some acceleration over the next year.
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