Loosening Credit Helps Housing Market Bounce Back

Loosening Credit Helps Housing Market Bounce Back

March 22nd, 2012


A recent report by Capital Economics stated that they expect the housing crisis to end this year, according to a report released Tuesday.  The rest of the report follows below:


One of the reasons: loosening credit. The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago. Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters. However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability. Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.  While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan. Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generate actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.


Companies like the Florida Regional Center and Developer Allied Capital and Development of South Florida, see this as an opportunity to continue to help redevelop the real estate market in South Florida.  The Florida Regional Center works with the EB-5 Program, which allows foreigners to invest in United States, USCIS Approved, projects that stimulate the U.S. economy. EB-5 participants will make an investment of $500,000 to $1,000,000 USD into a U.S. project that will create at least 10 jobs for U.S. citizens from the said investment. In return, the investor will receive a return on their investment, as well as a conditional United States Green Card. This can be obtained for yourself, your spouse, and any unmarried children up to 21 years of age. More information on the EB-5 visa can be found on www.flregionalcenter.com.   The Florida Regional Center hopes that a more stable housing market will help give future and current investors a greater peace of mind about their investments security.  As the market continues to grow stronger, their investments have a greater chance of creating jobs within the United States.    Ultimately, this will help bring in more investors to U.S. projects that help create American jobs and ultimately will help loosen lending by American banking institutions.


Allied Capital and Development of South Florida is looking at reports like these as a call to begin to look at developing residential real estate once again. “We are excited about the current state of the housing market recovery,” stated Nicholas Mastroianni III, Vice President of Operation of Allied Capital and Development of South Florida.   After the collapse of the market in 2008, many real estate development firms put residential projects on the back burner due to a surplus of supply in the market already.  With a consistent rise in job creation and in turn an increase in housing demands, Allied Capital and Development of South Florida is beginning to re-launch previously delayed projects, like Water Pointe, a multimillion dollar project that is projected to start construction this coming fall.  Water Pointe is a mixed-use development along US 1 Highway in Jupiter, Florida and will be home to 30 rental condos and 50,000 square feet of retail space that will take advantage of EB-5 investments to fund a portion of the project.


With the market continuing to regain its former glory, companies will begin to take advantage of the new market opportunities that are presented to them.  With a recovering housing market comes a recovering economy and visa versa, ultimately leading to another era of prosperity in the United States once again.