One-on-one with Bruce Van Saun, Citizens Bank CEO
The market that Bruce Van Saun, CEO of Citizens Financial Group, is most keeping an eye on for potential valuation bubbles these days: residential housing.
The big picture: Rock-bottom interest rates, labor and supply chain pressures affecting homebuilders, and the investor class scooping up homes have all helped drive prices higher, he notes.
Context: The median existing home sale price in August was 15% higher than it was a year ago, marking 114 months in a row of year-over-year growth, according to the National Association of Realtors.
Reality check: Banks are under pressure to extend credit to lower and moderate-income borrowers who have historically been left out of one of America's strongest vehicles for building wealth: homeownership.
- That can lead to a balancing act for banks between a desire to increase the flow of credit as well as provide sound financial management for borrowers and lenders, Van Saun said.
What they're saying “If you're going to wade into that territory, and you think that housing values could be a little overvalued at this point, and could come down as the Fed raises rates, those [loans] will become riskier,” he said.
- "When you see strong double-digit increases in major housing markets, that doesn't feel sustainable," Van Saun added.
Flashback: Residential mortgages, of course, were one of the drivers of the financial crisis.
- Key differences in the market this time around: there's not as much pure speculation on homes. Most buyers and lenders have shed the assumption — and commensurate behavior — that prices can only go up, he notes.
Go deeper: The housing market gets even hotter