If Realtors have anything to say about it, tight lending standards are preventing more home sales and holding back job creation.
The Washington, D.C.-based National Association of Realtors recently reached their conclusions in a survey conducted with real estate agents.
“Sensible lending standards would permit 500,000 to 700,000 additional home sales in the coming year,” NARchief economist Lawrence Yun said in a statement. “The economic activity created through these additional home sales would add 250,000 to 350,000 jobs in related trades and services almost immediately, and without a cost impact.”
The findings? Lenders take too long with applications, requiring excessive information and preferring only interested homebuyers with high credit scores.
Survey respondents reported that 53 percent of loans went to borrowers with credit scores above 740 in August, a sharp contrast when compared with the fact that 41 percent of homeowners with the same credit held these mortgages from 2001 to 2004.
The trade group observed that loan applications backed by the Federal Housing Administration showed an averageFICO score of 669 in May, significantly higher than 656 for loans originated in 2001.
Yun intimated that reportedly tight lending standards could hurt existing-home sales, which typically range from 5 million to 5.5 million in better times.
“Sales this year are projected to rise 8 to 10 percent. Although welcoming, this still represents a sub-par performance of about 4.6 million sales,” Yun said.
“These findings show we need to return to the sound underwriting standards that existed before the aberrations of the housing boom and bust cycle, and thoroughly re-examine current and impending regulatory rules that may cause excessively tight standards,” he added.
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