US: Does the housing market have room to run? - NBF

Krishen Rangasamy, analyst at National Bank Financial, points out that in the US, the Case-Shiller National Home Price Index has risen more than 50% after hitting a trough in early 2012.

Key Quotes

“The last time we saw such a run up in U.S. resale home prices was just before the 2006 housing crash. Does that mean the U.S. housing market is due for an imminent correction? Probably not.”

“Fundamentals remain good as evidenced by low mortgage rates, improving household formation and a strong economy. Unlike excesses observed before the 2006 crash, house price inflation is not out of line with income growth.”

“A hot labour market is supporting household incomes while tight mortgage standards are preventing runaway prices. Indeed, while back in 2006 less than 25% of mortgage originations went to highest-rated borrowers (credit scores 760+), these days this share is above 55%.”

“The high quality of loans and solid economy explain why mortgage delinquencies are at decade lows.”