The mortgage market may not be cooling down, but it’s turned the tide

A new report from ATTOM indicates that the number of mortgage originations fell sharply in the third quarter. The company says there were 3.59 million residential mortgages issued during this period, an increase of 3.2% from 3.48 million in the same quarter in 2020, but a decrease of 8.4% from 3.92 million fixtures in the second quarter of 2012, the biggest quarterly drop in more than a year.

The quarter-over-quarter decline followed another in the second quarter and marked the first time in more than two years that total lending has declined in two consecutive quarters. It was also the first time in a year since at least 2000 that total lending activity has declined from both the first to second quarters and from the second to third quarters of any year, typically are peak periods for buying a home. The two-quarter decline affected both refinancing and purchase loans, masking an increase in home equity lines of credit (HELOC).

By dollar volume, lenders issued $ 1.15 trillion mortgage values ​​during the third quarter, a period when fixed 30-year rates remained below 3%. That volume grew 10.7% year-over-year (from $ 1.04 trillion), but was down 6% quarterly from $ 1.23 trillion in the second quarter, the first quarterly decline since the start of 2020.

Homeowners refinanced just under 2 million households during the quarter, a decrease of 13% compared to the previous period and of 3% compared to the previous year. In addition to being the second consecutive decline, it is the largest in three years. The dollar volume of refinancing loans was down 10% from the second quarter of 2021, to $ 624.1 billion, albeit up 1% annually. While refinancing accounted for the largest share of loans, this share fell from 59% in the previous quarter and a year earlier to 55% in the third quarter.

Number of purchase loans fell 2% in Q2 to 1.36 million units. This was, however, a year-over-year gain of 17 percent. Dollar volume was down 1% to $ 482.6 billion from the second quarter, but was 30% higher than in the third quarter of 2020.

Home equity loans, meanwhile, increased for the second consecutive quarter, which last occurred in mid-2019. Home equity lines of credit, although down 9% annually, increased 2% between the second and third quarters of 2021, to about 238,500. The volume of $ 46 billion of these loans Q3, however, was still down 0.8% from Q2 and 15% lower than Q3 2020.

ATTOM said the drop in lending could or could not means the decade-long real estate boom is slowing down, but at a minimum it has reversed trends seen from early 2019 to early 2021, when total lending activity nearly tripled amid various forces including rates record interest rates and a pandemic that spurred an increase in home purchases which, in turn, pushed home prices to record highs.

“The excess work pile that plagued lenders for several years shrank again in the third quarter in the United States amid a few emerging trends,” said Todd Teta, chief product officer at ATTOM. “It increasingly appears that homeowners’ voracious appetites for refinancing deals have subsided significantly, while purchase loans have also declined. It is still too early to tell if the trends point to any major changes. in lending patterns or a broader housing boom. is important, particularly for home buying, which could suggest an impending housing market slowdown. We will be monitoring lending trends more closely over the course of the next few months. “

Overall lending activity declined from the second quarter of 2021 to the third quarter of 2021 in 186, or 86%, of the country’s 216 metropolitan statistical areas with a population above 200,000 and at least 1,000 total loans in the third quarter.

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