It’s never been cheaper or easier to borrow money to buy a home, the result of fundamental changes in the lending industry over the last decade that have greased the wheels of California’s runaway housing market.
Economists say that tumbling interest rates and a profound loosening of credit standards have allowed millions of families to buy homes despite a climate of quickly rising prices. Coupled with higher incomes, cheap and easy credit has fueled a remarkable surge in home ownership across the country.
But now, amid signs that a housing-market slowdown is under way, a growing chorus of prominent analysts is warning that too many borrowers are hooked on risky loans.
Vulnerability is particularly acute in California, where, last month, nearly 75 percent of home buyers used adjustable-rate mortgages. Such loans ratchet up payments if a benchmark interest rate increases, a situation experts say is extremely likely.
Concerns extend to the health of the lending industry, the keystone of the national economy. Analysts worry that a recession, a sharp rise in interest rates or a big drop in home values could trigger thousands of foreclosures as families lose the struggle to keep their homes after job loss, illness or overwhelming jumps in payments.
For this complete story, please visit Credit Risks Creep into Housing Market.
