“As a dog returns to its vomit, so fools repeat their folly.” – Prov. 26:11
It appears there is some repeat folly brewing.
Remember subprime mortgages? Well, they’re back.
We’ve written extensively about the stock market bubble blown up by artificially low interest rates and Federal Reserve quantitative easing. But stocks aren’t the only asset bubble out there. In fact, 2017 may go down as the year of the bubbles. And the new housing bubble is one that seems to be floating under the radar.
Financial manager James Stack has noticed it. He predicted the housing crash in 2005, and he told Bloomberg the housing market is flashing red again.
It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial. People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”
Remember back when mortgage lenders loosened credit standards making it easier to get a loan and blew up a giant housing bubble?
That’s happening again.
According to a report released by Fannie Mae, lenders facing lower profit margins are trying to expand the borrower pool.
Facing constrained mortgage demand and a negative profit margin outlook, more lenders say they have eased rather than tightened home mortgage credit standards, according to Fannie Mae’s third quarter 2017 Mortgage Lender Sentiment Survey. Across all loan types – GSE Eligible, Non-GSE Eligible, and Government – the net share of lenders who reported easing credit standards over the prior three months reached a new high since the survey’s inception in March 2014, after climbing each quarter since Q4 2016.”