A majority of North American mortgage bankers fear another real estate bubble is forming, according to a recent survey conducted for FICO, a predictive analytics software company.

The survey found that 56 percent of a pool of American and Canadian respondents directly involved in mortgage lending expressed concern that “an unsustainable real estate bubble is inflating.”

Andrew Jennings, chief analytics officer at FICO, said the housing market is “bifurcated” with strong price growth pushing total homeowner equity in the U.S. to its highest level since late 2007, even as 6 million people struggle with underwater loans that exceed the values of their homes by an average of 33 percent.

“That doesn’t feel like a healthy, sustainable growth situation,” he said. “No wonder many lenders in both Canada and the U.S. are concerned about the risk in residential mortgages.”

The market’s schizophrenic behavior may be troubling, but a survey released by the Mortgage Bankers Association today indicates that any unsustainable path the U.S. market may be headed down looks a lot different than the one that led to the housing bust.

The trade group’s Mortgage Credit Availability Index increased to 115.8 in June from 115.1 in May — a level that pales in comparison to that of 2006, when the index would have registered a level around 800.

A relaxing of minimum credit scores and maximum loan-to-value ratios for Federal Housing Administration and Department of Veterans Affairs loans were behind June’s uptick in the index, according to the MBA.

Trulia Chief Economist Jed Kolko says U.S. properties are still undervalued by 3 percent, and many of the hottest markets aren’t close to as overvalued as they were during the peak of the housing boom.

California’s Orange County, the “frothiest” market in the U.S., is just 17 percent overvalued versus being 71 percent overvalued in the first quarter of 2006.

Perhaps the Canadian respondents to the FICO survey accounted for a disproportionate share of those who expressed bubble concerns. 

Min Zhu, deputy managing director of the International Monetary Fund, recently noted that Canada’s house-price-to-rent and house-price-to-income ratios are far above their historical averages — two indications that homes could be overvalued.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Inman Connect is LIVE today! Join us and thousands of your peers from wherever you are.Register Now×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription