HOME-MORTGAGE LENDING DECLINES AGAIN ACROSS U.S. DURING THIRD QUARTER AS MORTGAGE RATES CLIMB

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Nov 30, 2023, 00:01 ET

Residential Loans Drop 3 Percent After Brief Second-Quarter Surge; Purchase and Home-Equity Lending Both Down 7 Percent Following Earlier Gains; But Refinance Activity Rises for Second Straight Quarter

IRVINE, Calif., Nov. 30, 2023 /PRNewswire/ -- ATTOM, a leading curator of land, property, and real estate data, today released its third-quarter 2023 U.S. Residential Property Mortgage Origination Report, which shows that 1.54 million mortgages secured by residential property (1 to 4 units) were issued in the United States during the third quarter, representing a 3 percent decline from the prior three-month period. That drop-off marked the ninth decline in the last 10 quarters – a string broken only by a spike during the second quarter of this year.

The third-quarter downturn, which came amid increases in mortgage rates and home prices, left total residential lending activity down 26 percent from a year earlier and 63 percent from a high point hit in 2021.

Lending activity resumed its extended downturn during the third quarter with a mix of gains and losses in major categories of residential lending, as growth in refinance activity was more than offset by drops in purchase and home-equity lending. The number of refinanced loans increased 5 percent quarterly, to roughly 516,500, while lending to home buyers went down 7 percent, to about 752,000. Home-equity credit lines also dipped 7 percent, to 272,000.

Measured monetarily, lenders issued $482 billion worth of residential mortgages in the third quarter of 2023. That was down 4 percent from the second quarter of 2023 and 28 percent from the third quarter of last year.

Despite the third-quarter shifts, the portion of all residential mortgages represented by different kinds of loans remained roughly the same compared to the second quarter. Purchase loans still comprised about half of all mortgages issued during the third quarter, while refinance packages made up one-third and home-equity loans just under 20 percent. However, that remained far different from two years ago, when refinance deals comprised two-thirds of all activity and purchase loans just a third.

"The mortgage industry took another hit in the third quarter as the spike in residential lending during the Spring turned out to be temporary," said Rob Barber, CEO at ATTOM. "Refinance deals stood out as the lone bright spot. That seemed a bit odd given that interest rates went up, but may have stemmed from homeowners pulling cash out of their growing equity. Overall, the impact of higher rates and other forces working against borrowers remained striking, resulting in total loan activity still off by a remarkable two-thirds over just two years."

Barber added that "the typical housing market slowdown during the Fall is likely to further reduce purchase lending in the immediate future, while borrowing by homeowners should hold fairly steady if projections for stable interest rates turn out to be accurate."

The third-quarter lending trends took shape as Home-mortgage rates increased again over the Summer, pushing up the cost of borrowing after dipping slightly in the first and second quarters of 2023. Average rates for 30-year, fixed loans rose above 7 percent, which was more than double the historically low rates from two years earlier. At the same time, an ongoing tight supply of properties for sale across the U.S. helped keep a lid on the number of buyers seeking mortgages to purchase homes.

Total lending activity decreases quarterly in almost two-thirds of nation
Banks and other lenders issued a total of 1,539,828 residential mortgages in the third quarter of 2023, down 3 percent from 1,589,359 in the second quarter of 2023. The fallback resumed a two-year run of declines that was broken only by a 22 percent spike in the second quarter of this year.

The latest total also was down annually by 26 percent, from 2,077,214 in the third quarter of 2022, and 63 percent from a recent high point of 4,167,003 hit two years ago.

A total of $482.5 billion was lent to homeowners and buyers in the third quarter, which was down 4 percent from $504.3 billion in the prior quarter and down 28 percent from $674.1 billion in the third quarter of 2022.

Overall lending activity dipped lower from the second to the third quarter of this year in 126, or 63 percent, of the 201 metropolitan statistical areas around the U.S. that had a population of 200,000 or more and at least 1,000 total residential mortgages issued from July through September of 2023.

Total lending also remained down from the third quarter of 2022 in 195, or 97 percent, of the metro areas analyzed. It was off by at least 25 percent annually in 98 of those markets (49 percent).

The largest quarterly decreases were in St. Louis, MO (total lending down 33.7 percent from the second quarter of 2023 to the third quarter of 2023); Atlanta, GA (down 24.3 percent); Naples, FL (down 17.6 percent); Salisbury, MD (down 17.4 percent) and Barnstable, MA (down 15 percent).

Aside from St. Louis and Atlanta, metro areas with a population of least 1 million that had the biggest decreases in total loans from the second quarter of 2023 to the third quarter of 2023 were San Jose, CA (down 12.6 percent); Washington, DC (down 11 percent) and San Francisco, CA (down 10.9 percent).

The biggest quarterly increases among metro areas with a population of at least 1 million came in Buffalo, NY (total lending up 15.2 percent from the second to the third quarter of 2023); Grand Rapids MI (up 9.8 percent); Honolulu, HI (up 7.9 percent); New York, NY (up 6.2 percent) and Detroit, MI (up 5.6 percent).

Refinance mortgage originations rise for second straight quarter after two-year fall
Lenders issued 516,461 residential refinance mortgages in the third quarter of 2023. That was up 5 percent from 490,412 in the prior quarter, marking the second quarterly increase in a row since loan rollovers hit a low point this century in early 2023.

At the same time, though, the number of refinance packages remained down 25 percent from 692,113 in the third quarter of 2022 and was still 81 percent less than a peak of 2,744,788 reached in the first quarter of 2021.

The $151.8 billion dollar volume of refinance packages in the third quarter of 2023 was up 4 percent from $145.4 billion in the second quarter. But it was still down 33 percent from the $225.8 billion level in the third quarter of 2022.

Refinancing activity rose quarterly in 153, or 76 percent, of the 201 metro areas around the U.S. with enough data to analyze. But it remained down annually in 195, or 97 percent, of those metros.

The largest quarterly increases were in Huntsville, AL (refinance loans up 180.8 percent from the second quarter to the third quarter of 2023); Cedar Rapids, IA (up 116 percent); South Bend, IN (up 68.6 percent); Kingsport, TN (up 54.3 percent) and Springfield, IL (up 48.7 percent).

Metro areas with a population of least 1 million where refinance activity increased most from the second quarter to the third quarter of 2023 were Tucson, AZ (up 24.3 percent); Honolulu, HI (up 17.8 percent); Indianapolis, IN (up 14.6 percent); Houston, TX (up 14.6 percent) and Dallas, TX (up 14.1 percent).

Metro areas with a population of least 1 million and the largest declines in the number of refinance loans from the second quarter to the third quarter of 2023 were St. Louis, MO (down 26.8 percent); San Francisco, CA (down 11.2 percent); San Jose, CA (down 11.2 percent); San Diego, CA (down 9.4 percent) and Seattle, WA (down 6.3 percent).

Purchase mortgages recede after second-quarter spike
Loans issued to home buyers resumed a downward path in the third quarter of 2023, dropping 7 percent following a spike of nearly 30 percent in the second quarter of this year. Lenders originated 751,720 purchase mortgages in the third quarter of 2023, down from 807,729 in the second quarter.

The latest number of purchase mortgages also was down 25 percent annually, from 1,004,508 in the third quarter of last year, and 50 percent from a peak reached in the Spring of 2021.

The $283.1 billion dollar volume of purchase loans in the third quarter of 2023 was down 8 percent from $306.8 billion in the second quarter, and 24 percent from $374.3 billion in the third quarter of 2022.

Residential purchase-mortgage originations decreased quarterly in 137 of the 201 metro areas in the report (68 percent) and annually in 187 of those markets (93 percent).

The largest quarterly declines were in Atlanta, GA (purchase loans down 46.3 percent from the second to the third quarter of 2023); St. Louis, MO (down 35.3 percent); Augusta, GA (down 30.8 percent); Greeley, CO (down 28 percent) and Gulfport, MS (down 23.7 percent).

Aside from Atlanta and St. Louis, the biggest quarterly decreases in metro areas with a population of at least 1 million in the third quarter of 2023 came in Orlando, FL (down 19.4 percent); Phoenix, AZ (down 19.3 percent) and Austin, TX (down 17.8 percent).

The top increases in purchase lending from the second quarter of 2023 to the third quarter of 2023 in metro areas with a population of at least 1 million were in Buffalo, NY (up 38.3 percent); Honolulu, HI (up 23.6 percent); Rochester, NY (up 16.8 percent); Grand Rapids, MI (up 14.7 percent) and New York, NY (up 14.4 percent).

HELOC lending also falls in two-thirds of U.S.
Home-equity lines of credit (HELOCs) also decreased in the third quarter of 2023, partly reversing a second quarter gain. Homeowners took out 271,647 HELOC loans in the third quarter of 2023, which was down 7 percent from 291,218 in the second quarter and down 29 percent from 380,593 a year earlier.

The $47.5 billion volume of HELOC loans in the third quarter of 2023 was down from $52.1 billion in the second quarter, a 9 percent decline. The latest level also was down annually, by 36 percent.

HELOCs comprised 17.6 percent of all loans in the most recent quarter. That was down from 18.3 percent in the prior quarter but still four times the level recorded in the early part of 2021.

HELOC mortgage originations decreased from the second quarter of 2023 to the third quarter of 2023 in 67 percent of the metro areas analyzed. The largest quarterly decreases in metro areas with a population of at least 1 million were in St. Louis, MO (home-equity credit lines down 39 percent); Pittsburgh, PA (down 33.7 percent); Honolulu, HI (down 27.9 percent); Boston, MA (down 15.3 percent) and Minneapolis, MN (down 15.2 percent).

The largest quarterly increases in HELOC activity in metro areas with a population of at least 1 million and sufficient data to analyze came in Tulsa, OK (up 15.5 percent); Grand Rapids, MI (up 11.4 percent); Tucson, AZ (up 7.3 percent); San Antonio, TX (up 7.1 percent) and Hartford, CT (up 5.6 percent).

FHA loan portions go up again while VA lending decreases
Mortgages backed by the Federal Housing Administration (FHA) rose as a percentage of all lending for the eighth straight quarter. They accounted for 233,975, or 15.2 percent, of all residential property loans originated in the third quarter of 2023. That was up from 13.7 percent in the second quarter of 2023 and 11.3 percent in the third quarter of 2022.

Residential loans backed by the U.S. Department of Veterans Affairs (VA) totaled 75,334, or 4.9 percent, of all residential property loans originated in the third quarter of 2023. That was down from 5.4 percent in the previous quarter and from 5.2 percent a year earlier.

Purchase loan amounts tick downward while down payment percentages increase
The third quarter of 2023 saw a slight decrease nationwide in the median single-family home loan but an increase in the typical down payment percentage for home purchases.

Among homes purchased with financing in the third quarter of 2023, the median loan amount was $319,500. That was down 0.9 percent from $322,500 in the prior quarter, although still up annually by 1.1 percent, from $316,000.

The median down payment of $35,050 on single-family homes and condos purchased with financing in the third quarter of 2023 was up 12.2 percent from $31,250 in the second quarter of 2023. With home prices rising at a smaller pace around the country, the typical down payment increased as a percentage of the median purchase price. It represented 9.2 percent of the median price in the third quarter of 2023, which was up from 8.2 percent in the prior quarter and about the same as the 9.3 percent level from a year earlier.

Report methodology
ATTOM analyzed recorded mortgage and deed of trust data for single-family homes, condos, town homes and multi-family properties of two to four units for this report. Each recorded mortgage or deed of trust was counted as a separate loan origination. Dollar volume was calculated by multiplying the total number of loan originations by the average loan amount for those loan originations.

About ATTOM

ATTOM provides premium property data to power products that improve transparency, innovation, efficiency, and disruption in a data-driven economy. ATTOM multi-sources property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, and neighborhood data for more than 155 million U.S. residential and commercial properties covering 99 percent of the nation's population. A rigorous data management process involving more than 20 steps validates, standardizes, and enhances the real estate data collected by ATTOM, assigning each property record with a persistent, unique ID — the ATTOM ID. The 30TB ATTOM Data Warehouse fuels innovation in many industries including mortgage, real estate, insurance, marketing, government and more through flexible data delivery solutions that include bulk file licenses, property data APIs, real estate market trends, property navigator and more. Also, introducing our newest innovative solution, that offers immediate access and streamlines data management – ATTOM Cloud.

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