Industry NewsMortgage

Market forces, regulators threaten credit crunch

Part 3: Midyear housing update
Published on Jul 25, 2007

Editor's note: How bad will the real estate market get before it gets better? Inman News compiles the facts and analysis in this five-part series. (Read Part 1, "The housing market: How bad will it get?" Part 2, "Vendors cope with real estate downturn"; Part 4, "Investor worries rise"; and Part 5, "Diminished role for GSEs, FHA.") The fate of housing markets where loose lending practices helped inflate housing prices may depend on how tight-fisted mortgage lenders become now that many of those loans are going bad, economists say. In a recent study on the use of adjustable-rate mortgage loans in 22 Los Angeles neighborhoods where prices plummeted between 1990 and 1995, academics Andrey Pavlov and Susan Wachter determined that cutting off access to such loans worsened the downturn. It was the fluctuation in the use of the risky loans, not their higher default rates, that most exacerbated the declines, they said (see Inman News story). Predicting how tight credit will get in the current...

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