Struggling housing markets use high LTVs to their benefit

Housing markets still struggling to recovery are benefitting from higher loan-to-value ratios, Pro Teck Valuation Services' Home Value Forecast for September found.

The report references Comptroller of the Currency Tom Curran's comments to the City Club of Cleveland, when he said the OCC had informed banks that the 90% LTV limit does not "create an ironclad ban on lending above that limit, even if there are no credit enhancements." 

"This should be good news to cities like Cleveland that have not benefitted as much as other communities from the broad housing recovery," said Tom O'Grady, CEO of Pro Teck Valuation Services. "Some loosening of credit policy will be needed for the recovery to penetrate deeply into the communities hardest hit by the housing crisis."

Last month, the report examined price appreciation and other indicators' impact on the housing recoveries in San Francisco and Detroit.

This month, the report went a step further and looked at regular average sold price versus total mortgage trends in those markets to bring this phenomenon into focus.

In San Francisco, buyers have averaged 20+% down over the last 14 years (LTV ratios 67–82%), while Detroit has averaged LTV between 86% and 101%. 

And it’s not just Cleveland and Detroit that would benefit.

"Apache Junction, Arizona, just like Detroit and Cleveland, would benefit from higher LTV limits to spur the housing recovery," added O'Grady. "Higher LTV in conjunction with many of the other credit safeguards that have been adopted in the past five years should protect banks and safeguard the economy from a repeat of 2007."

Pro Teck Valuation Services' also updated its list of the 10 best and 10 worst performing metros.

Here are the 10 best

1. Bellingham, Washington
2. Boise City, Idaho
3. Durham-Chapel Hill, North Carolina
4. Mt. Vernon-Anacortes, Washington
5. Oak Harbor, Washington
6. Phoenix-Mesa-Scottsdale, Arizona
7. Pueblo, Colorado
8. Salinas, California
9. Stockton-Lodi, California
10. Wilmington, North Carolina

Here are the 10 bottom:

1. Detroit-Dearborn-Livonia, Michigan
2. El Paso, Texas
3. Huntsville, Alabama
4. Lake County-Kenosha County, Illinois-Wisconsin
5. McAllen-Edinburg-Mission, Texas
6. Midland, Texas
7. Atlantic City-Hammonton, New Jersey
8. Hagerstown-Martinsburg, Maryland-West Virginia
9. Jacksonville, North Carolina
10. Saginaw, Michigan