The below article by David Sims takes a look at the investment potential of Fannie and Freddie. While we’ll let you determine whether or not to invest in these entities, the article does touch upon three interesting housing market statistics that we feel are worth mention.

1)      A recent study conducted by the Urban Institute found that the credit scores of homebuyers today are higher than they were in 2000, prior to the expansion of the housing bubble. In 2000, 35% of homebuyers had credit scores of 720 or greater. Today, over 60% of home buyers have credit scores over 720. This sizable shift, in part a result of tighter, government mandated credit standards, has tempered demand for housing over the past 7 years.

2)      The implementation of tighter credit standards has locked out 4,000,000 potential homeowners/buyers, changing the trajectory of housing as renters becomes more prevalent and household growth stagnates. With housing a primary driving force of our economy, the impact of long term stagnation in household growth could be far reaching.

3)      Since 2007, the private market for mortgages has all but vanished. Prior to the housing bubble, the private market accounted for 10-15% of residential mortgage originations, Fannie and Freddie accounted for 35%-45% with Banks making up the rest. When the private market evaporated in 2007, Fannie and Freddie, along with their tighter credit standards, gained market share and have since accounted for 60-70% of residential mortgage originations.

While no one wants to return to the “Wild West” ways of the mid-2000s, this article does point to some key areas where changes could be made to generate responsible housing demand. We’d like to hear your thoughts. Has our industry over-compensated for errors made during the housing bubble?