In addition, more lenders than ever finance home purchases to subprime applicants with prior credit trouble, and more subprime lenders offer refinances. Decades ago, the rule of thumb was that a borrower's mortgage loan should not be much higher than his annual household income. This rule evaporated with home price inflation in the 1980s. Recently, loan size relative to income has continued to grow. All these figures set new records, SMR believes.
Single people make up a greater percentage of the borrower universe than ever before.
By definition, singles are more credit-risky than married couples. Singles have only one income on which to rely, putting them more at risk in the event of job loss or unexpected income reduction. Regarding total life savings, SMR calculates that more than one of four existing mortgage borrower households is as good as broke, and another one in four isn't far behind. Some commentators have criticized the government's method for calculating the annual savings rate because it omits capital gains made on paper in the stock market. However, SMR noted, the at-risk demographic segment measured by total wealth has not participated much in the stock market.