Volume 101  |  July 21, 2022

Guardian Asset Management

Weekly Newsletter

Guardian endeavors to provide you with the latest in housing, industry and market news from Washington D.C. and around the country. It is our goal as your industry partner to be informative, relative and topical.

From the General

Counsel's Desk

Are We Doomed To Repeat The 2000's Housing Crisis?

The early 2000s housing crisis left many Americans financially devastated after losing their real estate investments and homes. It’s no surprise that people are still wary of this crisis repeating itself whenever there’s an extreme flux in the housing market—like our current market, almost two decades later.

However volatile our current market may be, it’s important to note that we are not doomed to repeat the 2000s housing crisis. Let’s explore where these two instances differ and why current homeowners should rest assured that history will not repeat itself.

Credit rating agency Experian, along with the S&P Dow Jones Indices, has released its latest monthly iteration of its Consumer Credit Default Indices Report for June 2022 which aims to represent a “comprehensive” measure of changes in consumer credit default rates and shows that the composite default rate rose two basis points to 0.53%. 

Breaking the total default rate down, the first mortgage default rate was up two basis points to 0.38%. the highest default rate since September 2020. Additionally, the bank card default rate rose six basis points to 2.55% and the auto loan default rate was one basis point higher at 0.62%. 

Mortgage applications drop to lowest level

since early 2000

A measure of US mortgage applications to buy or refinance a home fell to the lowest since the turn of the millennium in the latest sign of sluggish housing demand.

The Mortgage Bankers Association’s market index dropped in the week ended July 15 to the lowest since February 2000, data released Wednesday showed. The group’s measure of home purchase applications fell for a third week to a more than two-year low.

The housing market has been cooling off as mortgage rates near the highest since 2008 compound affordability challenges. Separate data Wednesday showed existing-home sales fell for a fifth month in June to a two-year low.

For all those who’ve been frustrated by the continuing need to rent because of the lack of affordable housing, the near-term future is looking overall at least as bad as the immediate past.

There’s a three-part problem: a vicious demand circle, the economics of building, and investors.

Kyle Tomcak was looking for a home for his in-laws in the suburbs around Denver, something priced close to $450,000.

Tomcak became dispirited as he lost out to investors fronting cash offers $100,000 over the asking price. Then mortgage rates ballooned, putting his price range out of reach.

“All of a sudden, your buying power is less … even though your payments are the same,” he said.

Tomcak, 39 and a project manager for a commercial painting company from Aurora, Colorado, had hoped to lock in a monthly mortgage payment of $2,350. His mortgage consultant recommended dropping the maximum price he’d pay for a home, first to $300,000 then to $200,000.

He has abandoned his search for now.