dapperdan19

Plotting the April Case/Shiller Housing Numbers

I've been charting both the Case-Shiller and OFHEO indexes for the Seattle area. The OFHEO index (conforming Fannie and Freddie paper) is definitely further along in it's correction process. If you plot versus a 4.50% growth trend going back to January '91, the OFHEO index is just about back to that trendline. Case-Shiller is still over 20% above that trendline. The Jumbo market still has a ways to correct. It going to be a tough 12 months for the McMansions. On the other hand, not so bad for the FTHB type properties.

One issue we're going to have moving forward is that DU 7.0 has really tightened some of the underwriting standards for conforming loans. Fannie Mae has gotten really really tight. I look at the mix of loans that I'm doing now versus last year and it's a total transformation from all Fannie/Freddie product to right now I've got a mix of 100% government loans (FHA, VA, USDA). Every single loan I'm doing right now is government.

Believe it or not, I'm doing FHA loans for people with excellent credit. 764 midscore type of paper going to FHA because Fannie/Freddie, with the LTV cutback in declining markets, is effectively only going to 85% LTV/CLTV in markets deemed "declining markets".

For those lamenting/moralizing about credit worthiness, all I can say is that the credit quality going through and getting approved for the past 9 months is the best credit quality I've ever seen in my lifetime. Anyone doing loans right now will tell you the same thing. It's much tougher to get an approval, but the benefit is that overall credit quality is extremely high right now.