Lending Standards Are Not Like They Were Leading Up to the Crash

You might be worried we’re heading for a housing crash, but there are many reasons why this housing market isn’t like the one we saw in 2008.

One of which is how lending standards are different today. Here’s a look at the data to help prove it. 

Every month, the Mortgage Bankers Association (MBA) releases the Mortgage Credit Availability Index (MCAI). According to their website:

“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is . . . a summary measure which indicates the availability of mortgage credit at a point in time.”

Basically, the index determines how easy it is to get a mortgage. Take a look at the graph below of the MCAI since they started keeping track of this data in 2004. It shows how lending standards have changed over time. It works like this: 

• When lending standards are less strict, it’s easier to get a mortgage, and the index (the green line in the graph) is higher.

• When lending standards are stricter, it’s harder to get a mortgage, and the line representing the index is lower.

In 2004, the index was around 400. But, by 2006, it had gone up to over 850. Today, the story is quite different. Since the crash, the index went down because lending standards got tighter, so today it’s harder to get a mortgage.

Loose Lending Standards Contributed to the Housing Bubble

One of the main factors that contributed to the housing bubble was that lending standards were a lot less strict back then. Realtor.com explains it like this: 

“In the early 2000s, it wasn’t exactly hard to snag a home mortgage. . . . plenty of mortgages were doled out to people who lied about their incomes and employment, and couldn’t actually afford homeownership.” 

The tall peak in the graph above indicates that leading up to the housing crisis, it was much easier to get credit, and the requirements for getting a loan were far from strict. Back then, credit was widely available, and the threshold for qualifying for a loan was low.

Lenders were approving loans without always going through a verification process to confirm if the borrower would likely be able to repay the loan. That means creditors were lending to more borrowers who had a higher risk of defaulting on their loans.

Today’s Loans Are Much Tougher To Get than Before

As mentioned, lending standards have changed a lot since then. Bankrate describes the difference: 

“Today, lenders impose tough standards on borrowers – and those who are getting a mortgage overwhelmingly have excellent credit.”

If you look back at the graph, you’ll notice after the peak around the time of the housing crash, the line representing the index went down dramatically and has stayed low since. In fact, the line is far below where standards were even in 2004 – and it’s getting lower. Joel Kan, VP and Deputy Chief Economist at MBA, provides the most recent update from May:

“Mortgage credit availability decreased for the third consecutive month . . . With the decline in availability, the MCAI is now at its lowest level since January 2013.”

The decreasing index suggests standards are getting much tougher – which makes it clear we’re far away from the extreme lending practices that contributed to the crash.

Bottom Line

Leading up to the housing crash, lending standards were much more relaxed with little evaluation done to measure a borrower’s potential to repay their loan. Today, standards are tighter, and the risk is reduced for both lenders and borrowers. This goes to show, these are two very different housing markets, and this market isn’t like the last time.

Keep reading.

Related Links

• This Is the First Decision You Should Make When Decorating a Small Bedroom

• What Homebuyers Need To Know About Credit Scores

• How to Create a Budget for Your Upcoming Bathroom Remodel

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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This Is the First Decision You Should Make When Decorating a Small Bedroom

Most people aren’t blessed with a palatial, Cher Horowitz-sized bedroom à la Clueless (color-coded motorized closet and all, IYKYK)

Luckily, though, there’s no shortage of tried-and-true decorating hacks to help maximize square footage in a compact sleep space, from brightening paint colors (hint: try creams and blues) to furniture layout ideas. Recently, I even learned about a new, expert-approved small-bedroom design tip that should arguably be priority number one when it comes to designing your sleeping quarters.

I asked New York-based designer Kyi Gyaw of Kyi Gyaw Interiors to share a few of her top small-space styling pointers, and she had one particularly notable takeaway. According to Gyaw, the very first decision you should make in decorating any teeny-tiny bedroom is — drum roll, please — determining “if you want to go quiet or loud.” What does that mean, exactly? Essentially, choosing a distinct tone for the space from the get-go, whether that’s more muted and minimalist or bold and packed with personality. Below, Gyaw breaks down how to pull off both ends of the small bedroom spectrum. 

How to Decorate a “Quiet” Small Bedroom

If you’d rather lean into a neutral bedroom design scheme, Gyaw first recommends being intentional with your color palette by honing in on just three to four hues total — specifically soothing, muted shades. “There’s a trend of only using white and beige these days, but it’s OK to add color as long as they are pastel and softer,” she explains. From there, Gyaw also suggests adding “a lot of interest in textures and very subtle patterns” with textiles and decorative accessories, but again, sticking with similar tones throughout the space “to not overwhelm your eyes,” she adds. Consider finishing off the look with linen bedding and window treatments specifically for the ultimate “welcoming, relaxed, and lived-in” feel, Gyaw notes.

Lamp placement is key in any tranquil bedroom as well. “I suggest having different types of lighting in your bedroom so that you can really enhance the mood,” says Gyaw. Think beyond just ceiling lights, as Gyaw notes they have a tendency to create a “cave-like feeling.” Instead, “in order to have that layered lighting effect, you will need table lamps and floor lamps,” Gyaw adds. For a warm, cozy ambience, she advises 2700K temperature bulbs, preferably with dimming capabilities. 

How to Decorate a “Loud” Small Bedroom

“When I think of loud spaces, I think of bold and fun,” says Gyaw. “It’s OK to have a lot of things going on, but I suggest you find a common thread.” She cites playing with different textile patterns and colors, for example, yet keeping them all within the same fabric family, like velvet or satin. Once you’ve landed on a cohesive design scheme, you can then get as creative as possible with vibrant rugs, bedding, throw pillows, and art. For the latter, Gyaw proposes setting up a gallery wall that incorporates mirrors — especially sculptural styles that double as accent pieces — to diversify the setup and help brighten any small bedroom. 

In terms of lighting in a more maximalist environment, Gyaw’s all for making a big statement. “Lighting is such an important aspect of any interior, and people will notice a fun chandelier, table lamp, wall sconce, or floor lamp,” she says. No need to fully reinvent the wheel here, though: You can instantly perk up an existing light with a punchy new shade, notes Gyaw, who references Etsy as a shopping hotspot for unique options. That upcycling mentality even extends to furniture makeovers, too. “I love reupholstering vintage furniture to give it a new life,” she says. “You can find a simple storage ottoman and reupholster it to a really unique fabric.” End-of-the-bed benches and reading chairs are other options you can consider for re-covering, as well.

Of course, there’s always the option to pick and choose elements from both “quiet” and “loud” small bedroom design ideas. Just be deliberate when curating furniture and decor pieces so that the space doesn’t feel overly cluttered or jarringly mismatched — unless, of course, that’s the look you’re going for because it speaks to you.

Get more like this on Apartment Therapy.

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• Here's Why Life Is So Good in "15-Minute Cities"

• What Homebuyers Need To Know About Credit Scores

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Here’s Why Life Is So Good in “15-Minute Cities”

Picture this: You walk out your front door, hop on your bike, and ride to a doctor’s appointment.

On your ride home, you drop by the grocery store to pick up a few veggies for dinner. Later, you walk to the park for a little sunset stroll.

This fantasy could be your reality if you move to a “15-minute city.”

What is a 15-minute city, anyway? As the name suggests, it’s a neighborhood or urban development in which everything residents need to thrive is within a quick 15-minute walk or bike ride from home. That includes shopping, healthcare, leisure, work, school, services — you name it.

The concept is not new — a business professor and scientist named Carlos Moreno popularized the idea back in 2010 — but it has been in the news a lot lately. And not for the reason you might guess: Conspiracy theorists latched onto the idea and falsely equated 15-minute cities to prison camps, in which governments would monitor and restrict citizens’ movements.

Recent controversies aside, the concept likely has staying power. City leaders around the globe included 15-minute cities on their list of steps communities can take to recover from the COVID-19 pandemic in a way that promotes health, sustainability, inclusivity, and economic resilience. Here’s what you need to know if you’re planning a move and want to consider a 15-minute city.

The Pros and Cons of 15-Minute Cities

Proponents say 15-minute cities have numerous benefits. Because they’re designed for walking and biking, they should help reduce our reliance on fuel-guzzling, greenhouse-gas-emitting vehicles amid human-caused climate change.

“The concept of a 15-minute city is very much on brand with the current interest in reducing our carbon footprint and mitigating the negative human impact on the planet,” says real estate broker Julia Hoagland. “When people are within a short distance of work, shopping, play, and entertainment, they don’t need to drive a car as often and might not even need a car at all.”

A prominent example of a 15-minute city in the U.S. is Portland, Oregon. Living in a 15-minute city can also help residents stay active and spend more time outdoors, which has been linked with mental health benefits. And because people are out and about (instead of alone in their cars) they’re more likely to socialize and foster connections, says real estate broker Louise Phillips Forbes. “When everything is condensed in a mini-community, people flourish through relationships that might not happen otherwise,” she says.

With key destinations so close together, residents can spend less of their time and energy on commuting and focus more on leisure activities, says real estate broker Stephane Guerrier. Buying a house in a 15-minute city can also be a savvy financial move, she adds.

“The convenience and accessibility of essential services make your neighborhood more attractive to potential buyers or renters,” she says. “When people see they can have everything they need close by, they’re willing to pay more for a home in that area.”

The flip side of this, of course, is that you’ll likely pay higher prices when you’re hunting for a house to buy. A home in a 15-minute city may simply be out of your price range.

“The closer you are to the action, the higher the prices are — that’s the typical give-and-take scenario,” says real estate agent Ivan Chorney. “If you want it all, you better be prepared to give more from your wallet.”

Depending on the type of development, you may also have to settle for a smaller home and property, and that just won’t work for everyone. “If having a big home and a big yard are the most important things to a buyer, then they’ll likely need to be farther away from the action,” Chorney says.

But if location — and, more specifically, proximity — is at the top of your real estate wish list, then buying in a 15-minute city could help you really hone in on what’s important to you in a home. This is true in New York City, which is sort of like a 15-minute city on steroids. There, residents treat public spaces, like parks and playgrounds, and shared spaces, like restaurants and gyms, as extensions of their living space, says real estate agent Kate Wollman-Mahan.

“Most New Yorkers do not have the luxury of thinking of their home as a place that can meet all of their desires, but they learn to prioritize what they really need at home,” she says.

Keep reading on Apartment Therapy.

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Should You Buy or Sell a Home in 2023? Here’s the Realtor.com Housing Forecast for the Rest of the Year

What a difference a few months can make in the housing market.

Late last year when Realtor.com® issued its housing forecast for 2023, our economics team believed the number of homes for sale would jump substantially, home prices would continue climbing, and rising rents would continue to bedevil tenants across the country.

Clearly, not all of our predictions came true. That’s why Realtor.com has revised its forecast to reflect some new realities in the housing market that are having an outsized impact on buyers struggling with higher costs, sellers reluctant to give up their rock-bottom mortgage rates, and shell-shocked tenants who endured years of landlords jacking up their rents.

“It was a good time to check in and update our forecast,” says Realtor.com Chief Economist Danielle Hale. “We made a bold call that home prices wouldn’t go down in 2023, and with the latest data, we’re revising that projection.”

The big takeaway for the second half of the year is that, while home prices, mortgage interest rates, and rents will come down a little bit, most folks won’t see much—if any—relief. There won’t be any big price drops reminiscent of the Great Recession.

In fact, the average monthly mortgage payment* is about 15% more per month than it was a year ago.

“Home costs are still going to be higher for buyers in 2023 because home price declines are very mild and not universal,” says Hale. “Some areas are still seeing home prices going up and mortgage rates are still very high.”

For-sale home and rental prices are expected to dip

In a long-awaited, 180-degree turn for the housing market, home prices are expected to finally come down a little nationally.

Realtor.com is anticipating median home list prices will dip 0.6% in 2023 compared with 2022. Originally, we had anticipated that prices would rise 5.4%. (This is only for existing homes and doesn’t include new construction.)

Even a small decrease is a departure from years of steadily climbing prices. Last year, home prices shot up 10.2% year over year.

The declines are at least partly due to prices having fallen in the nation’s priciest real estate markets, such as in the West. Buyers simply couldn’t afford those price tags plus high mortgage rates, so something had to give. In the more affordable Midwest and Northeast, prices have steadied or even risen.

“We’re seeing more divergence between how local housing markets are doing,” says Hale. “In areas that are more affordable, we’re seeing more buyer interest, more sales, and more competition keeping prices high.”

Renters are also expected to get a bit of a reprieve. Monthly rental prices are anticipated to dip 0.9%, some welcome news for renters who have been hitting their financial limits after years of large rent hikes and high inflation squeezing their budgets, In addition, more apartments are coming online, easing the shortage of rental housing. Initially, Realtor.com had projected rents would rise 6.3% in 2023.

“Asking rents are expected to fall. [But] whether any particular tenant is going to find rents are lower depends on when they last moved,” says Hale. “Renters who stayed put and didn’t contend with the higher rents of the last few years might find their rent has some catch-up to do.”

Lower mortgage rates will help stimulate the housing market

Prices aren’t the only things headed south. Mortgage interest rates are expected to decrease to 6.1% by year’s end. Realtor.com had expected they would be around 7.1% by the end of 2023.

The U.S. Federal Reserve is expected to moderate the rate hikes that have caused mortgage rates to soar and, in turn, bludgeoned the housing market. Now that inflation is finally slowing, that’s taken some of the pressure off of the Fed to raise its rates.

The Fed has indicated there might be two more rate increases this year. Once the Fed’s rate increases are done, mortgage rates are poised to fall a little.

“It means affordability will start to improve, but not drastically,” says Hale.

Fewer homes are for sale

The Realtor.com economics team had predicted that the number of homes on the market would surge as homes took longer to sell to fewer buyers. However, that didn’t work out as expected.

Homeowners who scored ultralow mortgage rates over the past few years have been loath to list their homes and give up those rates. So they’ve stayed put, keeping inventory low.

“The lock-in effect has been stronger than we anticipated,” says Hale. “That’s going to improve gradually over time. The longer existing homeowners are in their homes, even if they have a low mortgage rate, the more likely it is their current home won’t meet their needs. They’ll also have more equity that will cushion the blow” of buying a new home with a higher mortgage rate.

Builders aren’t expected to put up enough new homes to get the nation out of its housing shortage either. Realtor.com foresees the number of new housing starts plummeting 19.6% this year compared with last as builders contend with fewer buyers and an environment where it’s harder to get credit to start new projects.

Overall, Realtor.com foresees the number of homes for sale dropping 5% this year.

That lack of inventory is also holding sales back. Even buyers who can afford today’s prices and mortgage rates are struggling to find something for sale.

Home sales are anticipated to fall 15.8% this year to about 4.2 million sales. That would be the fewest number of homes sold since 2012. It’s also more dire than early predictions of a 14.1% decline in sales.

“We have seen the bottom in existing-home sales,” says Hale. “It’s going to take a long time to improve off of that low.”

Learn more on Realtor.com

Related Links

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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How to Create a Budget for Your Upcoming Bathroom Remodel

Remodeling your bathroom can be exciting, but it can also be expensive.

With so many choices and options to consider – from fixtures and finishes to materials and labor – it can be difficult to know where to start. One of the most important steps when planning a bathroom renovation is setting a budget. Creating a budget can help you prioritize your needs, prevent overspending, and ensure that you get the most bang for your buck. In this blog post, we will provide you with a comprehensive guide on how to create a budget for your upcoming bathroom remodel.

Establish Your Goals and Priorities

The first step for bathroom remodeling is identifying your goals and priorities. Before you start gathering quotes or picking out tile, consider what you want to achieve with your renovation. Do you need more storage? Do you want to upgrade your fixtures and finishes? Once you have established your goals and priorities, you can create a budget that reflects them.

Research the Cost of Materials and Labor

Once you have determined your goals and priorities, it’s time to research the cost of materials and labor. Start by making a list of the items you will need for your renovation, such as cabinets, countertops, flooring, lighting, and plumbing fixtures. Then, research the prices of these items and estimate how much labor will cost. Keep in mind that prices can vary depending on the quality of the materials you choose and where you live.

Set a Realistic Budget

After you have researched the cost of materials and labor, it’s time to set a budget. Be realistic about what you can afford and what you want to achieve. Remember that unexpected expenses may arise during your renovation, so it’s best to leave some wiggle room in your budget. A good rule of thumb is to set a budget that is 10-20% higher than your estimated costs.

Consider Financing Options

Depending on the scope of your bathroom renovation, you may need to consider financing options. Home equity loans, credit cards, and personal loans are all options to consider. Before you choose a financing option, be sure to read the terms and conditions carefully and understand the interest rates and fees.

Track Your Expenses

Once you have created a budget and started your renovation, it’s important to track your expenses. This will help you stay on track and avoid overspending. Keep track of your receipts, invoices, and payments in a spreadsheet or budgeting app. This will help you easily see how much you have spent and how much you have left in your budget.

Creating a budget for your upcoming bathroom remodel may seem daunting, but it’s an essential step in ensuring a successful renovation. By establishing your goals and priorities, researching the cost of materials and labor, setting a realistic budget, considering financing options, and tracking your expenses, you can create a budget that works for you and your renovation. Remember, a good budget is not only about saving money but also prioritizing your needs and getting the most out of your investment.

Keep reading.

Related Links

• Have a Backyard You Don’t Know What to Do With? Here’s Some Inspiration…

• The Main Reason Mortgage Rates Are So High

• 5 Tips for Creating a Cute, Cozy, Kid-Friendly Play Area

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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