According to recent reports, Capital Economics expects the housing crisis to end this year. Their main line of reasoning: banks loosening credit requirements.
Capital Economics notes that the average credit score required to obtain a mortgage loan is currently 700. This is definitely higher than the scores that were required prior to the housing crisis, but it is consistent with the requirements one year ago.
Other indicators in the market refer to not only this stabilization that is being seen in current lending standards, but also to banks loosening their credit requirements, creating greater availability of funds to lend.
Currently, banks are lending amounts up to 3.5 times borrower earnings; which is up from a low during the crisis of 3.2 times borrower earnings.
Even further encouraging news, banks are loosening loan-to-value ratios (LTV), as Capital Economics predicts “the clearest sign yet of an improvement in mortgage credit conditions.” In 2010 the lowest LTV reached 74 percent, with banks currently lending at 82 percent LTV.
While it's true that credit conditions may have loosened slightly, the fact is some potential homebuyers are still struggling with credit requirements; and according to Capital Economics in November, 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.