We’ve expressed herein a few times of late (here’s one) our view that — rising/record home prices notwithstanding — today’s housing market does not nearly possess bubble characteristics.


To further support that notion, take a look at the latest quarterly Fed assessment of U.S. consumer credit, courtesy of Bespoke Investment Group. I.e., it takes a lot more (a lot more!!) than the ability to fog a mirror (the mid-2000s litmus test) to qualify for a mortgage these days:    
 click charts to enlarge…

As shown in the chart, mortgage lending standards remain almost brutally high. Even the 10th percentile (i.e., worse than 90% of all loans). Experian describes FICOs of 670 an above as “good”, so that gives you an idea of just how tight mortgage credit has been in recent years; very, very few borrowers with low FICOs (and therefore a lower likelihood of repayment) have been given mortgages since the mid-2000s subprime debacle.

That’s resulted in low overall
mortgage origination. As shown
in the chart, mortgage
origination (both purchase and
refinancing) was running in the
$700bn range for most of the
mid-2000s, topping $1 trillion
earlier in the period. The modern
mortgage market does
around $500bn/quarter of volume,
drastically lower given
higher home prices and incomes
since the mid-2000s.

It’s also important to reemphasize
how high quality
mortgage lending has been on a
FICO basis. As shown in the
chart, about half of all
mortgage originations go to
FICOs north of 780; Experian
describes an 800 FICO as
“exceptional”, which really
serves to emphasize that it’s
only very high quality borrowers
with easy access to credit at
the moment.