Can We Afford a Housing Boom?
Now that the U.S. housing market has recovered, many people are becoming optimistic about the future of real estate. And while some are bullish, others are concerned about the market rebounding too quickly.
One way to evaluate the stability of the market is to analyze credit statistics, however, this may not provide the most accurate assessment. You can determine the probability of defaulting but not how credit metrics interact to gauge the risk of a loan.
Another aspect to consider is the practice of risk layering to drive performance. This was a popular practice before the housing crisis, but it backfired once the housing bubble burst, leading to the default of many underlying loans.
Looking at surface-level metrics on transactions may not offer a complete picture of the market. If you’re analyzing transactions, it’s important to examine all of the factors involved.
So what is the general consensus about lending? Well, mortgages are just different in today’s market. Read more about how you can analyze the different aspects of borrowing here.