Evan Soltas
Aug 6, 2012

The Housing Recovery Strengthens

The case for housing bullishness grew significantly stronger today after the Fed released the latest numbers from the Senior Loan Officer Survey. It's a case I've argued previously -- see here in March, when I saw "green shoots" in construction payrolls and hours; or here in May, when multifamily housing and median home prices began to blossom.

The guys giving out the loans themselves, in effect, had two things to say to the Fed's surveyors: they're done tightening standards on mortgage loans, both to prime and subprime borrowers, and they're seeing more people looking to take out mortgages.

That combination -- a stabilization of mortgage lending supply after years of contraction, and a return of demand from borrowers -- could very well be the next big story in the comeback of the housing market in the United States. Any improvement in residential mortgage delinquency rates, as I noted here, could push things even further along, because it will improve the profitability of bank lending in such markets.

Here's the key graph.On net, standards on prime mortgage loans remained the same -- and what that means is that the tightening is over for the best borrowers. A net 11 percent said they were for nontraditional (read: subprime) mortgage borrowers.

But most importantly: For the first time since the recession began, more than half of all lenders -- a net 52.5 percent of them -- said demand from prime mortgage borrowers was increasing. That percentage is rising fast, as is the net 37 percent who said demand from nontraditional borrowers is increasing.

H/T Conor Sen.