Real Estate Market on the Rebound?

November 08, 2012 | Eric Gaylord, CFA, Principal

Recently, the decline in the U.S. housing market has shown some evidence of bottoming. The national average home price has crept up off of lows according to the Case-Shiller Home Price Index, and inventories of existing homes on the markets have shrunk significantly since the outset of the credit crunch. Given this new data and a Federal Reserve fiscal policy including QE3 designed to induce access to home financing, it begs the question, “Has access to home financing returned?”

The Federal Reserve conducts a quarterly survey of banks operating in the U.S. called the Senior Loan Officer Opinion Survey on Bank Lending Practices. As part of this survey, mortgage lenders report changes in demand for residential loans as well as whether standards for loan approval are becoming more or less stringent. To assess the health of the loan market, this week’s chart focuses on prime mortgage borrowing, since this category reflects loan seekers that should be considered creditworthy. In the chart, we see that banks are reporting a notable increase in demand for prime residential loans this year. Meanwhile, lending standards required by banks remain strict. The data appears to show that for Americans with control over their personal finances, the affordability of home ownership is starting to outweigh the risks. Meanwhile, banks remain cautious. The percentage of outstanding prime mortgages on their balance sheets remains elevated above the historical average. If these trends continue, investors can expect slow improvements in the residential real estate market, but given the persistent attention to high lending standards that was absent pre-crisis, these improvements should prove to be sustainable and accretive to long-term value.

Eric Gaylord, CFA

Get to Know Eric

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content


First to Cut: The Fed or the ECB?

Based on implied probabilities derived from options markets, investors are currently forecasting an 82% chance that the European Central Bank…


1Q 2024 Market Insights Webinar

— LIVE WEBINAR APRIL 25 — Please join Marquette’s research team for our 1Q 2024…


Sweet and High Up

Chocolate eggs and bunnies may have appeared more expensive to shoppers this Easter weekend, as the price of cocoa futures…


The Crystal Ball Has Clouded

Last month, Marquette published a Chart of the Week that highlighted the aberrational length of the current…


The Dynamic Duo

In 2023, investors were stunned by the robust performance of seven prominent mega-cap stocks deemed the “Magnificent Seven.” Largely beneficiaries…


The DPI Lie?

There are multiple ways to gauge how private markets managers are performing, such as benchmarking returns relative to their peers…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >