Despite grappling with economic uncertainty marked by inflation and fluctuating interest rates, the home mortgage sector witnessed a robust rebound in the second quarter of 2023.
According to a report by ATTOM, a curator of land, property, and real estate data, residential mortgage activity showed signs of revival after two years of consecutive decline. The report indicates a 21% quarter-over-quarter increase in total residential mortgages, the first uptick in two years, even though the annual numbers remain down by 38% compared to last year.
Lenders issued $494 billion worth of residential mortgages in Q2, representing a quarterly increase of 23%. This revitalization comes after a sharp downturn in overall lending compared to highs in 2021.
The second-quarter figures show a remarkable 29% quarterly increase in loans granted for home purchases, rising to nearly 794,000. Refinance packages also saw a 14% quarterly increase, hitting 477,000. That was down 51.1% from 975,997 in the second quarter of last year and remained 83% less than a peak of 2,743,700 reached in early 2021. Additionally, home equity lines of credit (HELOCs), while still down 19.5% annually, increased by 13% to 285,000 from 251,975 in the prior quarter. The increase came after two consecutive quarterly declines.
While the overall lending landscape appeared to bounce back, the makeup of the loan types witnessed minor changes. Purchase loans accounted for about half of all mortgages issued, refinance deals constituted nearly one-third, and home equity loans comprised just under 20%. This is a marked contrast from two years ago when refinancing activities dominated the scene, comprising two-thirds of all mortgage activities.
The revival has been attributed to a medley of economic forces that fostered favorable conditions for loan-seeking American households. Home mortgage rates remained relatively stable, hovering around 6% in April before inching back up towards 7% in June. This follows a year where the rates more than doubled from historical lows under 3%.
The Spring home-buying season saw a resurgence amid easing inflation and an upturn in the stock market. These conditions endowed potential buyers with greater financial resources, contributing to a 10% jump in the national median home price in the second quarter.
"Home buyers and owners alike lined back up again at the doors of mortgage lenders this Spring seeking loans of all kinds," said Rob Barber, CEO at ATTOM. "It looks like owners took advantage of the small rate drop to refinance existing loans, while a jump in mortgages for purchasers was likely fueled by a number of forces that pushed the overall housing market to heat back up during the Spring buying season."
While optimistic, Barber cautioned that the surge could be short-lived. "Lenders certainly aren't anywhere near as busy as they were back in 2021. And the second quarter surge could be just a momentary thing. But the upturn was significant and a testimony to how strong the housing market remains around the country."
In the second quarter of 2023, the average loan amount for single-family homes and the typical down payment percentage for such purchases experienced a rise across the U.S.
The average loan amount for homes bought with financing during this period increased to $324,000, marking a 6.6% rise from the previous quarter's $303,875. However, this was still a 2.3% decline compared to the same period a year ago, when the median loan stood at $331,500.
Regarding down payments, the average amount for single-family homes and condos rose to $31,500 in Q2 2023, a 19.1% jump from the first quarter's figure of $26,450. With property prices climbing in most regions, the usual down payment as a portion of the median purchase price also grew. It accounted for 8.3% of the median price during Q2 2023, up from 7.6% in the previous quarter, although it was still lower than the 10.1% observed a year earlier.
