Do You Think We Are Going to Have a Residential Bubble Explosion?

September 20, 2022

Do we think we are going to have a residential bubble explosion? We examine data from JP Morgan to answer this question.

Full Transcript:

Hello, welcome to Arista Advice! Question of the week is: "Paul, do you think we are going to have a residential bubble explosion, Armageddon, like we had in '07-'08?" I don't know. I can't predict the future, but I can look at some data and helpful information to help us decide.

JPMorgan provided some really good insight and a lot of research that they did in going back and looking at the mortgage credit score application of borrowers going back many years. As you'll see on this chart, they went all the way back to the first quarter of 2003, and they looked at the borrowers that were borrowing money for their home credit score, and those that had a credit score of 660 or lower, you can see it represented a lot of the homes from '03 all the way to '09, and then there was a boom.

But where have a lot of the mortgage origination credit scores come from, in the last, from 2010 to 2019? 760 and higher, but from 2019 to 2022, look at all of the credit score borrowers of the volume of those that are borrowing money for their homes! Their credit scores of 760 or higher. Individuals that have, as they've demonstrated with the credit score, the ability to make payments, service their debt, and be responsible with their credit score.

Could it change? It sure could. Am I trying to compare years of borrowers and does Paul know the past and the future, as well as today? I don't, but this is a tool to help us look at the borrowers and the credit scores of those that have been borrowing and buying homes in the last four or five years, have very high credit scores.

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