In a good sign for the U.S. housing market, two reports out last week found that banks have begun to loosen the tight lending standards that followed the last housing crash and, as a result, demand for mortgage loans is increasing.
In its analysis, Marketwatch proclaimed the reports findings “paint a picture of a market that’s healing.” The first study was from the Mortgage Bankers Association, which found that mortgage-credit availability has increased each of the past three months. These increases follow what was a rather sluggish start to the year.
Secondly, the Federal Reserve reported that more banks have loosened up lending standards on prime residential mortgages, largely as the result of an improving jobs market and overall economy. Not surprisingly, the Fed reports demand for these loans has also gone up.
Lending standards are softening, but the Fed was quick to point out that credit conditions are still much tougher than what was typical in 2005.
Many economists and real estate experts believe the toughened standards actually went too far and left many credit-worthy buyers shut out. This has resulted in a slower-than-hoped recovery process for the U.S. housing market. But now, with lenders having more confidence in borrowers, the housing market could be poised for growth.