Home Value Predictor

To a large extent, the current housing market downturn is the consequence of exceptionally lax lending standards that amidst ample liquidity resulted in the creation of a housing bubble. The bubble burst once the unsustainable and artificially-inflated prices eroded affordability and the economic slowdown caused many borrowers with weak credit quality to default on their mortgage payments. The problem with the housing market was thus a reflection of a systematic failure of the credit system that overemphasized certain elements of risk management, such as FICO scores and risk-based models for credit rating, and ignored other factors that determine the capacity of mortgage borrowers to finance their obligations.
Before the bubble burst, many mortgage lenders focused primarily on quantitative risk indicators, such as FICO scores, when making their lending decisions. Yet, they failed to account adequately for other factors that influence borrowers’ capacity to service mortgage debt, such as down-payments, incomes, or future interest rates, and all current local variables which represent the flow of businesses, jobs, people, and capital, which influenced future price trends and movements that directly affect local markets and credit risks…

More in my new book The Missing Keys to Thriving in Any Real Estate Market

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