ATTOM: Originations Fall For 6th Straight Quarter

The number of residential mortgages originated in the United States declined in the third quarter, the sixth consecutive quarterly decrease, according to ATTOM Data Solutions.

Only 1.97 million mortgages secured by residential property (1 to 4 units) were originated in the third quarter, down 19% from the second quarter and down 47% from the third quarter of 2021 — the biggest annual drop in 21 years, according to ATTOM’s third-quarter 2022 U.S. Residential Property Mortgage Origination Report.

The report also found that, overall, lenders issued $636.5 billion in mortgages in the third quarter, down 22% from the second quarter and 46% annually. 

As with the number of loans, the annual decrease in the dollar volume of mortgages stood out as the largest since at least 2001, and was the latest sign that the 11-year U.S. housing market boom is losing steam.

“There are no surprises in this quarter’s loan-origination numbers, as the unprecedented jump in mortgage rates has battered both the purchase and refinance markets,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “Prospective homebuyers have been priced out of the market by the combination of 7% mortgage rates and higher home prices. And refinance activity will probably continue to decline, since the majority of homeowners have loans with sub-4% interest rates.”

Refis Drop

Just 661,000 residential loans were rolled over into new mortgages, and borrowers took out only 943,000 loans to buy homes during the third quarter.

Refinancing activity was down 31% from the second quarter and 68% from a year earlier. Refinancing activity also has dropped for six consecutive quarters, to a level that is just one-quarter of what it was in early 2021. 

The dollar volume of refinance loans in the period running from July through September was down 33% from the prior quarter and 67% annually, to $212 billion. The number of purchase loans slumped by 16% quarterly and 33% annually, as the dollar volume decreased to $353.9 billion.

Banks and other lenders issued 1.97 million residential mortgages in the third quarter, down 18.7% from 2.42 million in the second quarter and down 46.9% from 3.71 million in the third quarter last year. The annual decline was the largest since at least 2001. The $636.5 billion volume of loans in the third quarter was down 22.4% from $819.9 billion in the second quarter and was 46.4% less than the $1.19 trillion lent in the third quarter last year.

Overall lending activity decreased from the second quarter to the third quarter in 206, or 98%, of the 210 metropolitan statistical areas around the U.S. with a population of more than 200,000 and at least 1,000 total residential mortgages issued in the third quarter. 

Total lending activity was down at least 15% in 116 of the metros. The largest quarterly decrease was in Myrtle Beach, S.C., with total lending down 52.7%. 

The only metro areas where refinance lending increased from the second quarter to the third quarter were Sioux Falls, S.D., (up 11.4%), and Hartford, Conn. (up 3.2%).

Purchase Loans Fall, HELOCS Peak

Purchase mortgages, however, decreased for the fourth time in the last five quarters. Lenders originated 943,242 purchase mortgages in the third quarter of 2022. That was down 15.6% from 1,116,939 in the second quarter, and also was down 32.7% from 1,401,578 in the third quarter of 2021 – the biggest annual decline this century. 

On the opposite side, home-equity lines of credit (HELOCs)  saw an increase for the fifth time in the last six quarters. A total of 364,921 HELOCs were originated on residential properties in the third quarter of 2022, up 5.1% from 347,086 in the prior quarter and up 47.8% from 246,957 in the third quarter of 2021. 

Home equity lines of credit (HELOCs) were 18.5% of all third-quarter loans — almost four times the 4.8% level from the first quarter of 2021.

“While HELOC activity has dramatically increased over the past few quarters, its growth rate slowed down significantly on a quarter-to-quarter basis, which raises the question of whether we might be at or near a cyclical peak in HELOC activity,” Sharga said. “Even with the recent increases, HELOC volume is still nowhere near the record level of activity we saw in the mid-2000s during the run-up to the financial crisis.”

Mortgages backed by the Federal Housing Administration (FHA) also saw an upward tick during the third quarter, accounting for 224,021, or 11.4%, of all residential property loans originated in the third quarter of 2022. That was up from 10.7% in the second quarter of 2022 and 9.3% in the third quarter of 2021, and marked the fourth straight quarterly increase.

The median amount borrowed nationwide to buy a home, however, fell in the third quarter for the first time in three years. Homes purchased with financing in the third quarter saw a median loan amount of $315,000, down 4.5% from $330,000 the prior quarter, following 10 straight increases. It was still up 4.2%, though, from $302,197 in the third quarter of 2021.