U.S. Housing Crisis Predicted to End in 2012 as Banks Loosen Credit Standards

Analytics firm Capital Economics expects the housing crisis to end this year, according to a recent report. One of the reasons: loosening credit. Market indicators point to a stabilization of mortgage lending standards as well as a loosening of credit availability.

U.S. banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

The banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, the banks are now lending at 82 percent LTV.

Capital Economics is one of the leading independent macro economic research consultancies in the world, providing research on the US, Canada, Europe, Asia, Latin America, the Middle East and the UK, and on the property sector.