Sep 30, 2020 - Economy & Business

Lower rates, less risk

Data: St. Louis Federal Reserve; Chart: Axios Visuals
Data: St. Louis Federal Reserve; Chart: Axios Visuals

Perhaps more important than sustained demand, the mortgage financing landscape now is "very different from 2006," Danielle Hale, chief economist for tells Axios.

By the numbers: She cites metrics like the Mortgage Bankers Association's mortgage credit availability index, which found credit supply at its lowest level since March 2014 in August, and well below where it stood in 2006, at "over 800."

  • "Regulatory and legislative changes made after the last recession ensure that mortgages are more strictly underwritten and lower appetite for risk means lenders have tightened lending criteria compared to last year."
  • Similar metrics like the Urban League's housing credit availability index also show much lower risk being taken by lenders.

But, but, but: There is a downside. Tightening credit requirements also mean that many potential homeowners could be locked out of the market.

  • A June report from the Urban League prepared for the New York Fed noted that while the housing market seems strong, "Beneath the surface, credit has tightened. When credit availability becomes an issue, minority borrowers tend to be disproportionately affected."

Go deeper: Why the real estate boom could keep going for years

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