Mortgages: Come full circle?


Anyone who owned a home a decade ago knows a little something about how housing values can fluctuate.

Prior to 2006, most U.S. homeowners thought home values went only one direction: up. Sure, some years prices moderated, but generally, they went up 3 percent to 5 percent, and in some years, like in 2004, 2005, and 2006, they went way up. Few expected values would crash by 30 percent to 50 percent (or more!), as they did from 2006 to 2011. Homeowners are now just recovering from the debacle known as the bursting of the housing bubble.

We can blame both the run-up in home values in the early 2000s and the decline from 2006 to 2011 on “easy” credit. Lenders, supported by politicians with the notion that homeownership was good for everyone, eased credit requirements and lowered down payments for homebuyers. Blemished credit mattered less than it previously had, and thus more people qualified to purchase homes than had previously been able to qualify.