On the margin, though, some lenders might be inclined to respond to losses by tightening credit terms or being more cautious about extending loans rather than by raising additional capital.7 In short, housing problems affect the homebuilding industry, of course, but also have much broader effects – on neighborhoods and communities, on homeowners, on the financial system, and on the vitality of the economy as a whole.
This observation underscores the importance of efforts to improve the condition of the housing market. Availability of mortgage credit So why has the recovery in housing been so slow? One important factor is restraints on mortgage credit. Since its peak in 2007, U.S. home mortgage credit outstanding has contracted about 13 percent in real terms.