Mexx

Is Wells Fargo's Latest Memo a Sign Real Estate is Bottoming?

If there is a lesson that I hope all Americans learn from this housing/credit fiasco is that you cannot and should not buy more house than you can afford as measured by the House Value to Household Income Ratio. History has taught us that this ratio in healthy markets should not exceed 3x. I suspect that the 200 counties that WFC identified as requiring 25% down payment to make a loan are probably those above the 3x. Counties like San Diego, OC in CA and Dade in FL are still hovering in the >5x range, so yes, they have a ways to go down. The excerpt simply tells us that WFC is notching up their already prudent underwriting standards and realizing that the housing bubble is limited (from an underwriting perpsective) to specific markets.