bridge1.png

The next real estate boom

by Rob Regan on February 4, 2013

I just read this article at Calculated Risk about lending standards easing.  The article cites a Federal Reserve Board survey of loan officers:

The January 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of, and demand for, bank loans to businesses and households over the past three months.

To be clear the “easing” appears to be quite modest at this point.  But if you want to know how much more room the real estate market has to run this is probably now the most important factor to track.  Of course this is a bit of a trailing indicator since first prices had to bottom and then begin to rise before banks would even consider easing lending standards.  Generally price increases only occur after jobs start coming back.  Jobs nationally, and especially high paying tech jobs locally, have been on the rise for quite some time now.

Home prices have risen as a result, and thanks to low interest rates, high rent and low for-sale inventory we’ve got an incredibly hot San Francisco real estate market right now.  But so far this has been a two (or two and a half) legged recovery without a lot of help in the way of easing lending standards.  If standards ease, and continue in that direction, we may experience the 2004 through 2008 housing market all over again here in San Francisco.  For now it definitely feels like we’re back in 2004 with all of the over-bidding and multiple offers.  As asset prices rise, banks may view it as a safer and safer bet resulting in ever easier lending criteria pulling in more and more buyers.  Did we just take the hot tub time machine back to 2004?

Leave a Comment

Previous post:

Next post: