Atlanta home prices: Why are lenders making it easier to borrow?

Just as home prices are rising, demand is outpacing supply and experts are starting to wonder if there’s a housing bubble, lenders are looking to make it easier to buy.

Lenders say they plan to ease standards to make it easier for buyers to quality for mortgage loans, according to a survey released Tuesday by Fannie Mae.

The huge housing boom that led to a collapse in the housing market -- nationally in 2006, in Atlanta a year later -- was to a large extent fueled by easy money. The system -- that is, the lenders and their investors and the financial interests that bet on them -- were desperate to keep demand for homes growing.

Getting a loan became so easy, that many people got mortgages when their income was inadequate to make the payments. In some cases, they weren’t asked to prove they had any income at all. 

And after the market collapsed, so did the economy.

Given what happened a decade ago, it might seem the wrong, or just an unnecessary time to make it easier to borrow. After all, demand now already outpaces supply of homes for sale. The imbalance and the increase in prices is enough to make at least some experts use the ‘B’ word that described the pre-2006 market.

“As home prices continue rising faster than inflation, two questions are being asked: why? And, could this be a bubble?” says David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, which includes the Case-Shiller housing index. “Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up. “

The Case-Shiller housing index, released earlier Tuesday, showed metro Atlanta home prices rising an average of 5.8 percent during the past year, just slightly more than the national average. But some markets are growing much faster. Seattle, for example, has seen average home prices soar 12.9 percent in a year.

THE MOST EXPENSIVE ‘HOODS IN THE CITY OF ATLANTA

The ease in lending now does not seem to be driven by the same kind of financialization of loans that created devices like Collateral Debt Obligations and Mortgage Swaps. But it also not driven by a need to add demand to the market, according to Fannie Mae. 

Instead it’s an attempt among the lenders to hold on to market share, said Doug Duncan, senior vice president and chief economist at Fannie Mae

 “Expectations to ease credit standards climbed to survey high points ... as more lenders reported slowing mortgage demand and increasing concerns about competition from other lenders,”  he said.

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