Was it Bank of America’s Brian Moyniham or Conan O’Brien who was asked about Avocado Toast by CNBC’s Kelly Evans?
Mortgage lending standards have tightened since the housing bubble brought down the financial system a decade ago.
While homeownership has fallen, home prices have jumped back to pre-crisis levels, suggesting the cost and requirements for getting a mortgage are holding back many would-be buyers.
Brian Moynihan, Bank of America’s CEO, told CNBC on Thursday that eased regulations including a lower down payment could make it easier for millennials, in their household-formation years, to buy homes.
“Our goal, going back to regulatory reform, is should you move the down-payment requirement from 20% to 10?” Moynihan told CNBC’s Kelly Evans. “It wouldn’t introduce that much risk but would actually help a lot of mortgages get done.”
Evans asked Moynihan about mortgages in the context of the widely shared comments from the Australian tycoon Tim Gurner suggesting millennials should stop spending on avocado toast if they want to afford homes.
Leading up to the recession, some lenders (including Bank of America) lowered the 20% down-payment standard or required no down payment at all.
Lenders’ scars from the housing crisis have now made them cautious of whom they approve. In the first quarter, the median credit score of a new mortgage was 764, the highest in nearly two years and up from the prerecession average of 720, according to Gluskin Sheff.
To be sure, home prices are higher now than they were are the peak of the housing bubble, despite mortgage interest rates being considerably lower mortgage interest rates since 2007.
High house price growth coupled with low wage growth?
But do we really want to go back to 2003? In terms of The Fed Funds Target rate, we are already close! But do we want to return to 2003 underwriting standards?
Maybe Monihan has been SMOKING avocado toast?
Or is that Conan O’Brien?