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44 INEQUALITY MARKS RECOVERY; HOME PRICES TO STABILIZE e Demand Institute, a non-advocacy, non-profit think tank jointly operated by the Conference Board and Nielsen, released in February a new report entitled: "A Tale of 2,000 Cities: how the sharp contrast between successful and struggling communities is reshaping America." e report "finds that a large proportion of housing wealth is concentrated in a relatively small proportion of America's cities, towns, and villages." An 18-month research program that included an analysis of 2,200 cities and towns and in-depth interviews with 10,000 consumers provided data for the report's conclusions. e report's title is presumptively a reference to the Charles Dickens work, A Tale of Two Cities, which begins with the famous and seemingly contradictory phrase, "It was the best of times, it was the worst of times." e report seems to lend veracity to Dickens' opening remarks, noting that, "Of the 2,200 analyzed, the top 10 percent ranked by the aggregate value of their owner-occupied homes held 52 percent ($4.4 trillion) of the total housing wealth. e bottom 40 percent held just eight percent ($700 billion)." Fifty percent of communities studied are struggling to move forward after the recession, according to the report. "Housing is an important financial barometer for the larger U.S. economy, and a more nuanced social barometer for families and towns," said Kathy Bostjancic, director of macroeconomic analysis at e Demand Institute, and co-author of the report. "e housing trends analyzed in this report paint a powerful picture of how the Great Recession has impacted Americans in the short-term, and illuminate the potential long-term effect on our country." e presence of double-digit increases in home prices in the past two years are not indicative of future trends, according to the report. Rather, the upswing in prices was caused by investors buying up large tracts of distressed homes to meet rental demand. Home prices are expected to grow at a rate of 2.1 percent between 2015 and 2018 as supply and demand meet at a sustained equilibrium. "Now, with prices firmer and the number of distressed or foreclosed properties down, the market is stabilizing. More homeowners are looking to sell than previously, so inventories will rise; that and the expected rise in mortgage rates and only tepid median household income gains will moderate future house price rises," the report stated. However, equality will not be evident across all 50 states: "ere will be significant variations among all 50 states and the largest 50 metropolitan areas in the next five years. Price rises will be more than three times greater in the strongest markets than in the weakest ones." By 2018, e Demand Institute projects that the national median price for a home will be close to reaching its 2006 peak. However, when adjusted for inflation, the median home price will stand 25 percent below its 2006 level. Wells Fargo May Loosen Credit Requirements According to a report by Reuters, Wells Fargo is looking to re-enter the subprime mortgage market by lowering its standards of acceptable credit scores for borrowers. Wells Fargo is the largest U.S. mortgage lender, and a move back into subprime mortgages may signal a sizable shift in the mortgage lending environment. Wells Fargo is interested in customers with credit scores as low as 600, notes the report. Its prior limit was 640, often regarded as the limit between mortgages that are considered prime and subprime. Credit scores range from 300 to 850. Other large banks, however, seem reticent to follow Wells Fargo's lead, remaining cautious about any return to the subprime market. Lenders are wary of subprime mortgages, due in large part to the passage of the 2010 Dodd- Frank Law. If mortgage borrowers don't meet the law's eight criteria to qualify for a mortgage and later default on a loan, a borrower can sue the lender and argue the loan should have never been made. Lenders venturing back into the high-risk loans market are even using a subtle marketing trick to assuage fear and spur demand— subprime loans become "another chance mortgages" or "alternative mortgages," shedding the stigmatized "subprime" label. Incentivized by rising mortgage rates, lenders have plenty of reasons to target borrowers with lower credit scores. Rising rates are expected to reduce U.S. lending by 36 percent in 2014, according to the Mortgage Bankers Associations forecast, due to a large drop in refinancings. Wells Fargo is looking to lend to borrowers with weaker credit, but only under the condition the mortgages can be guaranteed by the Federal Housing Administration. Since the loans would be backed by the government, Wells Fargo can package them to sell to investors as bonds. Subprime mortgages were at the center of the financial crisis, but many lenders believe that with proper controls the risky business ventures can be properly contained and generate profit.

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