Loan Originations Continue to Drop Even as Demand for Housing Increases


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According to a RealtyTrac report, mortgage originations dropped in the first quarter of this year by 20 percent over the previous quarter. The report indicates that across all types of real estate financing, including purchase, refinance, and equity lines of credit, total dollar volume was down despite greater housing demand in some markets.

ATTOM Data Solutions, which operates the website RealtyTrac and manages the largest property database in the nation, released its Q1 2017 U.S. Residential Property Loan Origination Report indicating originations are down 21 percent from one year ago. The report shows that in the first quarter of 2017, over 1.4 million loans were originated on 1 to 4 unit properties, a 30 percent drop, with total dollar volume down to $347 billion, the lowest amount in over three years.

A new report from Freddie Mac shows mortgage rates sank to their lowest level of the year this week, but remain higher than they were at the beginning of the year. The data also indicates that rising rates made it more difficult for first-time homebuyers to qualify and unattractive for existing homeowners to refinance.

Los Angeles (28.2 percent) and San Diego (28.9 percent) had two of the highest shares of non-married co-borrower applicants out of the 35 cities nationwide with at least 1,000 single-family purchase originations. The increase in home prices coupled with more competition among homebuyers had fueled bidding wars and made it increasingly difficult for first-time buyers to enter the market. Approximately 20 percent of single-family purchase originations had multiple, non-married co-borrowers on the loan, an increase of 20% over last year.

The refinance market has also been hit by a decline in mortgage originations. ATTOM reports that a total of 675,899 refinance loans secured by 1-4 unit properties were originated in Q1 2017, a drop of 36 percent from the last quarter of 2016. Total dollar volume dropped 39 percent from last quarter, to $167.9 billion. That is more than a 26 percent drop from a year ago, and the lowest since the first quarter of 2006.

The total dollar volume of HELOC originations also dropped to $43.4 billion, a decrease of 14 percent over the last quarter, a low not seen since the first quarter of 2014. According to the report, a total of 226,598 Home Equity Lines of Credit secured by real property were originated in Q1 2017, a 14 percent decrease.

The purchase origination total dollar volume also dipped to a three-year low, down 27 percent from last quarter and 14 percent from a year ago to $136.6 billion. A total of 531,350 purchase loan applications were originated in Q1 2017, a decline of 29 percent from Q4 2016 and 18 percent from a year ago.

Meanwhile, rates have begun to drop even as the Federal Reserve indicates that it will continue increasing the short-term interest rate as the economy improves. Last week’s Treasury yields drove mortgage rates to their lowest levels since November. The 10-year Treasury bond, a key indicator in fixed-rate mortgages, stood at 2.22 percent on May 17.

Although industry experts see long-term rates climbing, the majority of mortgage originators are hopeful that the reduction in interest rates will drive up loan applications until the higher rate trend reasserts itself. However, the data was not all doom and gloom, showing that the rate of first-time homebuyers increased, with a larger share of Americans now seeking to participate in the housing market.

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