Source - only updated through q1 |
Source |
At the same time, we are seeing the long end of the tail of underwater homeowners coming back into positive equity. We are also seeing the continued recovery of the labor market, which is associated with more churn - more quits and hires.
And, we also have seen an acceleration downward in homeownership in the last few quarters. I think all of this adds up to a picture where housing and labor markets are finally reaching a full recovery level where frictions have been reduced. Homeowners who want to move are moving. Workers who want to test the market are moving to jobs with more opportunity.
But, since so many existing homeowners cannot qualify for mortgages in today's context, these healthy developments have the ironic effect of chilling the single family home market and mortgage credit markets.
Source |
Source |
I think it is interesting to look at the graph of the distribution of FICO scores and the graph of mortgage originations. The median FICO score is around 710 to 720. The median household has been a homeowner for 60 years. Now, look at the mortgage origination graph. There is no way that homeownership can remain above 50% without a sharp loosening of credit.
I also think it is interesting to look at the FICO score distributions. There is surprisingly little variation over time between 2005 and 2013*. The median score never left that 710-720 range. I have seen some reasonable discourse on the housing boom that suggested that the reason FICO scores didn't decline as much as the "predatory lender" cause would suggest, on mortgage originations during the boom, is because FICO scores were inflated by rising home values that allowed households to avoid debt problems. But, the FICO score stability shown here suggests that this could not have been that strong of a factor.
* The source link goes back to 2005.
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