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Next Stage of Housing Recovery Tied to Credit Loosening

The Comptroller of the Currency, Thomas Curran, recently spoke in favor of banks making mortgages exceeding supervisory limits on loan-to-value ratios in order to further fuel the housing recovery in areas hardest hit by the housing crisis.

In a speech to the City Club of Cleveland reported on by National Mortgage News, Curry said the OCC had informed banks that the 90% LTV limit does not “create an ironclad ban on lending above that limit, even if there are no credit enhancements.”  This should be good news to cities like Cleveland that have not benefitted as much as other communities from the broad housing recovery.

In last month’s Home Value Forecast, we highlighted how the housing recoveries of San Francisco and Detroit look drastically different.  One reason for this is the availability of credit.

Looking at regular average sold price versus total mortgage trends brings this phenomenon into focus:



In San Francisco, buyers have averaged 20+% down over the last 14 years (LTV ratios 67-82%), while Detroit has averaged LTV between 86 and 101%.  While we don’t want to go back to the days of sub-prime loans and zero down, some loosening of credit policy will be needed for the recovery to penetrate deeply into the communities hardest hit by the housing crisis.

We are seeing this same phenomenon even in hot markets around the country.  At Home Value Forecast, we have always said that real estate trends are local, and trends can change town to town, neighborhood to neighborhood.

The Phoenix CBSA landed in our top ten this month, and for good reason.  Low inventory and hot demand is leading to more ground being made up post housing crisis.

Looking at Scottsdale, we see an area where average home prices have been rebounding steadily since 2011 and now are 20% below all-time highs after dropping 37.5%.


Apache Junction, AZ, another city within the CBSA, is still 36% below its all-time high.  At the height of the housing crisis, homes in Apache Junction lost more than half their value — why were they more impacted by the housing crisis?


Below shows loan-to-value ratios for the two communities:



Apache Junction is more dependent on the credit markets for home price movements.  As you can see from the charts, LTV ratios in the area have historically been around 90%, while Scottsdale has been between 73–77%.  Scottsdale has been less dependent on credit, which equals easier credit and more people willing and able to buy.  Add in the desirability of the Scottsdale market and you can see why it lost less and has rebounded better than surrounding areas.

Higher LTV has historically meant more foreclosures also — something we saw during the housing crisis.  The graphs below confirm this:



Apache Junction has seen a steeper drop in home prices and a slower recovery, due to more foreclosures on high LTV loans.Jjust like Detroit and Cleveland, the town would benefit from higher LTV limits to spur the housing recovery.  Higher LTV in conjunction with many of the other credit safeguards that have been adopted in the past five years should protect banks and safeguard the economy from a repeat of 2007.

CBSA Winners and Losers

Each month, Home Value Forecast uses a number of leading real estate market-based indicators to rank the single-family home markets in the top 200 CBSAs and highlight the strongest and weakest metros.

The ranking system is purely objective and is based on directional trends.  Each indicator is given a score based on whether the trend is positive, negative or neutral for that series.  For example, a declining trend in active listings would be positive, as will be an increasing trend in average price.  A composite score for each CBSA is calculated by summing the directional scores of each of its indicators.  From the universe of the top 200 CBSAs, we highlight each month the CBSAs which have the highest and lowest composite scores.

The tables below show the individual market indicators that are being used to rank the CBSAs, along with the most recent values and the percent changes.  We have color-coded each of the indicators to help visualize whether it is moving in a positive (green) or negative (red) direction.

Top 10 CBSAs


It is interesting to note that there are only two California markets (Salinas and Stockton-Lodi) in the top ten this month.  Also, we have the addition of two East Coast markets in North Carolina (Durham-Chapel Hill and Wilmington).  All of the top ten markets have fewer than 4 months of remaining housing inventory (MRI).

Bottom 10 CBSAs

The bottom ten markets all have MRI above five months and three markets are above 10 months.  With the exception of Midland, TX, they continue to be plagued with higher foreclosures as a percentage of sales in each market.  In addition, Midland, El Paso and McAllen, TX join the bottom 10.  It will also be curious to note whether changes in the energy costs are impacting prices for the longer term or if this is a short term situation in those Texas markets. 

About Home Value Forecast

Home Value Forecast (HVF) is brought to you by Pro Teck Valuation Services.  HVF provides insight into the current and future state of the U.S. housing market, and delivers 14 market snapshot graphs from the top 30 CBSAs.

HVF is built using numerous housing and economic data sources.  The top 750 CBSAs as well as data down to the ZIP code level for approximately 18,000 ZIPs are available with a corporate subscription to the service.  To learn more about Home Value Forecast and Pro Teck’s full suite of residential real estate valuation products, visit  You can also find Pro Teck on Twitter at @ProTeckServices.

The monthly Home Value Forecast update also includes a listing of the 10 best and 10 worst performing metros as ranked by its market condition ranking model.  The rankings are run for the single-family home markets in the top 200 CBSAs on a monthly basis.  They highlight the best and worst metros with regard to a number of leading real estate market indicators including: sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio and foreclosure percentage and REO activity.

Also, Pro Teck Valuation Services offers reporters the following:

  • National, regional or metro level housing data
  • Monthly Updates and HVF Insights articles
  • By-request data for your story — custom data, heat maps and charts are available
  • Expert commentary from Home Value Forecast Editorial Committee:
    • Tom O’Grady, Chief Executive Officer, Pro Teck Valuation Services
    • Michael Sklarz, PH.D., President, Collateral Analytics
    • Jeff Dickstein, Chief Appraiser, Pro Teck Valuation Services