HOME-MORTGAGE LENDING NEAR TWO-DECADE LOW AS SLUMP CONTINUES ACROSS U.S. DURING FOURTH QUARTER

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Feb 29, 2024, 00:01 ET

Residential Loans Drop Another 14 Percent; Purchase, Refinance and Home-Equity Lending All Decline

IRVINE, Calif., Feb. 29, 2024 /PRNewswire/ -- ATTOM, a leading curator of land, property, and real estate data, today released its fourth-quarter 2023 U.S. Residential Property Mortgage Origination Report, which shows that 1.35 million mortgages secured by residential property (1 to 4 units) were issued in the United States during the fourth quarter, representing a 13.8 percent decline from the prior quarter. The drop-off marked the tenth in the last 11 quarters.

The fourth-quarter fallback left total residential lending activity down 16.5 percent from a year earlier and 67.7 percent from a high point hit in the first quarter of 2021. It came amid another period of elevated home prices and mortgage rates along with low supplies of homes for sale.

Ongoing declines in lending activity during the fourth quarter resulted from losses in all major categories of residential lending. Purchase-loan activity went down another 18.4 percent quarterly, to about 618,000, while refinance deals slumped 7.9 percent, to 488,000. Home-equity credit lines sank 12.7 percent, to 241,000.

Measured monetarily, lenders issued $417.4 billion worth of residential mortgages in the fourth quarter of 2023. That was down 14.9 percent from the third quarter of 2023 and 18.6 percent from the fourth quarter of 2022.

The different pace of change among various loan types helped raise the portion of all residential mortgages represented by refinance packages back above one-third, although that level remained far less than where it was three years ago before interest rates started to climb above historically low levels. Purchase loans continued to slip back below half of all mortgages but were still the most common form of mortgage. Home-equity loans dipped further below 20 percent of all activity.

"Multiple powerful forces continued to conspire against the mortgage industry during the fourth quarter, slicing back huge portions of their business," said Rob Barber, CEO at ATTOM. "There were signs during the peak buying season of 2022 that things were starting to turn around, with increases in purchase, refinance and HELOC deals. That could happen again this year as we head into this year's peak period, especially with interest rates coming down recently. But the fourth-quarter numbers revealed continued gloomy times for lenders, no matter how you sliced the pie."

Home-mortgage lending took another fall at the end of 2023 as average interest rates for 30-year fixed loans rose to between 7 percent and 8 percent. That further drove up home ownership costs at a time when record home prices in most of the country already were unaffordable, or a significant financial stretch, for average wage earners. Purchase lending took an additional hit from low supplies of homes for sale that helped reduce the number of properties available for potential mortgages.

Total lending activity down in more than 90 percent of nation
Banks and other lenders issued a total of 1,346,479 residential mortgages in the fourth quarter of 2023, down from 1,562,600 in the third quarter of 2023. The fallback resumed a nearly three-year run of declines that was broken only by a spike in the second quarter of last year.

The latest total also was down annually from 1,612,777 in the fourth quarter of 2022, and from a recent high point of 4,164,755 hit three years ago.

A total of $417.4 billion was lent to homeowners and buyers in the fourth quarter, which was down from $490.3 billion in the prior quarter and down from $512.7 billion in the fourth quarter of 2022. The latest figure stood at barely more than one-third of the recent quarterly peak of $1.29 trillion hit in the second quarter of 2021.

Overall lending activity dipped lower from the third to the fourth quarter of last year in 184, or 96 percent, of the 191 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 October through December of 2023.

Total lending also remained down from the fourth quarter of 2022 in 183, or 96 percent, of the metro areas analyzed. It was off by at least 15 percent annually in slightly more than half of those markets.

The largest quarterly decreases were in Anchorage, AK (total lending down 45.3 percent from the third quarter of 2023 to the fourth quarter of 2023); St. Louis, MO (down 42 percent); Charleston, SC (down 33.5 percent); Rochester, NY (down 31.5 percent) and South Bend, IN (down 25.7 percent).

Aside from St. Louis and Rochester, metro areas with a population of least 1 million that had the biggest decreases in total loans from the third quarter of 2023 to the fourth quarter of 2023 were Raleigh, NC (down 22.6 percent); Portland, OR (down 22.1 percent) and Denver, CO (down 21.8 percent).

The biggest quarterly increase, or the smallest decreases, among metro areas with a population of at least 1 million came in Buffalo, NY (total lending up 19 percent from the third to the fourth quarter of 2023); Atlanta, GA (down 3 percent); Washington, DC (down 3.6 percent); Orlando, FL (down 5.2 percent) and Fresno, CA (down 5.7 percent).

Refinance mortgage originations down after two straight gains
Lenders issued 487,671 residential refinance mortgages in the fourth quarter of 2023, down from 529,683 in the third quarter. The fallback followed increases in the prior two quarters.

The latest figure was down 5.3 percent from 514,915 in the fourth quarter of 2022 and was 82.2 percent less than a peak of 2,742,931 reached in early 2021.

The $146.2 billion dollar volume of refinance packages in the fourth quarter of 2023 was down 7 percent from $157.2 billion in the third quarter and 13.6 percent from $169.3 billion in the fourth quarter of 2022.

Refinancing activity shrank quarterly in 157, or 82 percent, of the 191 metro areas around the U.S. with enough data to analyze. It was down annually in 123, or 64 percent, of those metros.

The largest quarterly decreases were in Anchorage, AK (refinance loans down 46.9 percent from the third quarter to the fourth quarter of 2023); St. Louis, MO (down 39.2 percent); South Bend, IN (down 35 percent); Rochester, NY (down 31.5 percent) and Springfield, IL (down 25.4 percent).

Aside from St. Louis and Rochester, metro areas with a population of least 1 million where refinance activity decreased most from the third quarter to the fourth quarter of 2023 were Memphis, TN (down 23 percent); Raleigh, NC (down 21.7 percent) and Tulsa, OK (down 17.1 percent).

Metro areas with a population of least 1 million and the largest increases in the number of refinance loans from the third quarter to the fourth quarter of 2023 were Buffalo, NY (up 25.9 percent); Washington, DC (up 16.3 percent); Las Vegas, NV (up 11.8 percent); Baltimore, MD (up 6.7 percent) and San Diego, CA (up 6.2 percent).

Refinance packages comprised 36.2 percent of all loan originations in the fourth quarter of 2023. That was up from 33.9 percent in the prior quarter and from 31.9 percent in the fourth quarter of 2022, although still far less than the 65.9 percent portion in the first quarter of 2021.

Purchase mortgages dip again throughout U.S. after a brief surge
Loans issued to home buyers fell back in the last few months of 2023 for the second straight quarter after a surge of nearly 30 percent in the Spring of last year.

The latest total of 618,244 was down from 757,366 in the third quarter of 2023. It was also down 20.2 percent from 774,493 a year earlier and almost 60 percent from a high point hit in the Spring of 2021.

The $227.6 billion dollar volume of purchase loans in the fourth quarter of 2023 was down 20.1 percent from $284.7 billion in the third quarter and 18.9 percent from $280.6 billion in the fourth quarter of 2022.

Residential purchase-mortgage originations decreased quarterly in 183 of the 191 metro areas in the report (96 percent) and annually in 93 percent of those markets.

The largest quarterly decreases were in Sioux Falls, SD (purchase loans down 66.8 percent from the third to the fourth quarter of 2023); St. Louis, MO (down 46.2 percent); Anchorage, AK (down 44.1 percent); Birmingham, AL (down 40 percent) and Charleston, SC (down 39.3 percent).

Home-purchase borrowing comprised 45.9 percent of all loan originations in the fourth quarter of 2023, down from 48.5 percent in the prior quarter and 48 percent in the fourth quarter of 2022. But the latest level was still way up from 29.6 percent in early 2021 when refinance deals were dominating the lending business.

HELOC lending also falls in most markets
Home-equity lines of credit (HELOCs) also decreased in the fourth quarter of 2023, declining to 240,564 from 275,551 in the third quarter. The latest figure was down 25.6 percent from 323,369 a year earlier. The latest decrease marked the second in a row after a brief uptick last Spring.

The $43.6 billion volume of HELOC loans in the fourth quarter of 2023 was down from $48.4 billion in the third quarter, a 9.8 percent decline. The latest level also was down annually, by 30.6 percent.

HELOCs comprised 17.9 percent of all loans in the most recent quarter. That was down from 20.1 percent in the fourth quarter of 2022 but still four times the level recorded in the early part of 2021.

HELOC mortgage originations decreased from the third quarter of 2023 to the fourth quarter of 2023 in 87 percent of the metro areas analyzed. The largest quarterly decreases in metro areas with a population of at least 1 million were in Honolulu, HI (down 36.3 percent from the third to the fourth quarter of 2023); St. Louis, MO (down 34.3 percent); Rochester, NY (down 31.6 percent); New Orleans, LA (down 23.9 percent) and Milwaukee, WI (down 22.7 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 Kansas City, MO (up 15.4 percent); Dallas, TX (up 6.7 percent); San Diego, CA (up 6.4 percent); Houston, TX (up 5.2 percent) and Washington, DC (up 4.9 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 ninth straight quarter. They accounted for 211,184, or 15.7 percent, of all residential property loans originated in the fourth quarter of 2023. That was up from 15.1 percent in the third quarter of 2023 and 11.9 percent in the fourth quarter of 2022.

Residential loans backed by the U.S. Department of Veterans Affairs (VA) totaled 58,931, or 4.4 percent, of all residential property loans originated in the fourth quarter of 2023. That was the down from 4.8 percent in the previous quarter and from 5.3 percent a year earlier.

Purchase loan amounts and down payment percentages both decline
As the national median home price decreased in the fourth quarter of 2023, typical single-family home loan amounts and median down-payment percentages also ticked lower.

Among homes purchased with financing in the fourth quarter of 2023, the median loan amount was $305,900. That was down 4.1 percent from $319,113 in the prior quarter, although still up annually by 1.7 percent, from $300,700.

The median down payment of $32,500 on single-family homes purchased with financing in the fourth quarter of 2023 also was down, by 7.1 percent, from $35,000 in the third quarter of 2023. The latest figure represented 9 percent of the median home price, down slightly from 9.2 percent in the third quarter but unchanged from the fourth quarter of 2022.

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 ATTOM Cloud, bulk file licenses, property data APIs, real estate market trends, property navigator and more. Also, introducing our newest innovative solution, making property data more readily accessible and optimized for AI applications– AI-Ready Solutions.

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