A paper from the Urban Institute’s Housing Finance Policy Center analyzing credit accessibility to would-be homeowners concluded that credit has been “extraordinarily tight” in the U.S. since 2009.
The working paper, “Measuring Mortgage Credit Accessibility,” is primarily concerned with new and more accurate ways of measuring credit accessibility to borrowers, with the aim of better policy-making based on more accurate measurements. But in its analysis, it also found that mortgage credit has been very tight over the last five years.
“This new measure reveals a rather startling fact — that most consumers with less-than-perfect credit are unable to access the mortgage market, regardless of race or ethnicity,” lead researcher Wei Li said.
The study conclusions are based on three different progression rates, which are outlined in the report as:
- The demand to application progression rate (the portion of those consumers who want credit who actually submit an application)
- The application to origination progression rate (the portion of applicants who take out loans)
- The overall demand to origination progression rate (the portion of those consumers who want credit who become actual borrowers).
Per the report:
All three progression rates show that the mortgage credit market has been tighter since 2009 than in any prior period since 1998. For individuals with weaker credit profiles, the average demand to application progression rate (DOPR) between 1998 and 2001 was about ten times higher than the current 2 percent rate. The DOPR was 4.5 times higher than today in 2002 and 2003 and seven times higher from 2004 to 2008.
Since the financial crisis, the mortgage credit market has virtually closed its doors to weaker credit profile consumers, reducing the number of buyers and, thereby, lengthening the housing recovery. When affordable but rising home prices make homeownership an attractive proposition, this closed door means an excellent wealth-building tool is out of reach for many consumers with lower credit profiles.
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This article originally published at http://dc.urbanturf.com/articles/blog/urban_institute_shows_credit_extraordinarily_tight_since_2009/9184
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