Easy Credit

It’s summertime, and the song I heard on the radio recently promised ‘easy livin’ but no ‘easy credit’. Unfortunately Summertime promises no new insights on the U.S. housing market’s reported stall.

Based on recent data, anticipated improvement in housing activity has been hampered in large part because of credit restrictions. According to Zillowcredit availability is the biggest issue in the housing market today. Mark Kennedy, CIBC confirms “employment is improving, payment burdens from student loans are gradually declining, but credit standards remain the challenge.” The Street explains why U.S. banks are wary of making loans.

Conversely, the easy credit – not to be confused with ‘easy livin’ – is said to be found in Canada’s easy credit fuelling our condo economy. Cash-back mortgage schemes are available (where the lender provides the 5% required down payment in exchange for a higher rate) – or the down payment can be borrowed from a line of credit, personal loan, or credit card.

Could a fundamental shift in housing preferences among younger Americans also be contributing to sluggish single family housing starts? Construction is largely demand-driven, and “some have argued that the Great Recession resulted in a profound shift in preferences for millennials toward renting,” according to Jason Furman, chairman of the Council of Economic Advisors (HT: Mark Kennedy)

Conversely, here in Canada, kids are buying condos before they get cars. The scenario has some analysts expressing increasing concern over what happens when there’s a shift away from easy credit.

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