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U.S. Home Mortgage Lending In Q1 Falls To 23-Year Low

Jun 01, 2023
Photo credit: Getty Images/claffra

Total residential loans drops nearly 20% as just 1.25m loans were originated.

KEY TAKEAWAYS
  • Total residential loans drop another 19% in the first quarter from the previous quarter.
  • Refinance and purchase loans each fall nearly 20% quarterly, with refinancing down 85% YOY.
  • Home-equity lending drops for second-straight quarter.

Just 1.25 million residential mortgages were originated in the first quarter of 2023 in the United States — the fewest since late-2000, ATTOM reported Thursday.

The land, property, and real estate data company released its first-quarter 2023 U.S. Residential Property Mortgage Origination Report, which showed that originations of mortgage secured by residential property (one to four units) was down 19% from the fourth quarter of 2022, marking the eighth-straight quarterly decrease. Originations also were down 56% from the first quarter of 2022, and down 70% from a peak reached in the first quarter of 2021.

The overall decline was affected by sharp declines in both refinance and purchase loan activity, well as the second-straight quarterly drop in home-equity lending, ATTOM said. 

Lending activity contracted again as a slowdown in the 11-year U.S. housing market that started in the middle of last year stretched into 2023 amid elevated mortgage rates, consumer price inflation, and other signs of economic uncertainty.

During a period when average interest rates remained double what they were a year earlier, lenders issued just $388 billion worth of residential mortgages in the first quarter, down 20% from the fourth quarter of last year and down 58% year over year.

Overall activity included just 595,253 loans granted to homebuyers in the first quarter, 19% fewer than in the fourth quarter of 2022 and 44% below a year earlier. It was the fewest purchase loans issued since early 2014. The $216 billion in volume of purchase mortgages was down 18% quarterly and 45% YOY, ATTOM said.

Even fewer refinance mortgages were produced. Just 407,956 mortgages were rolled over into new ones — the smallest amount this century, ATTOM said. That was down 18% quarterly, 73% annually, and a staggering 85% from the first quarter of 2021. 

The value of refinance packages, at $127 billion, fell 21% quarterly and 74% annually, the report said.

Home Equity Lending Also Drops

Home-equity lending also dropped, falling 23% in the first quarter to a total of just 245,071. The decline marked the second quarterly decrease following a year and a half of gains, ATTOM said.

While lending activity continued to decline across the board in early 2023, the portion represented by different kinds of home loans held steady. Purchase loans continued to comprise about half of all mortgages issued in the first quarter of 2023, with refinance packages making up a third and home-equity loans 20%. But that was a big change from two years ago, when refinance deals made up two-thirds of all activity and purchase loans just one-third.

“Lenders saw opportunities dwindle even more during the first quarter as the longest slowdown in mortgage activity in at least 20 years continued,” said ATTOM CEO Rob Barber. “In one sense, it wasn’t that unusual, given that wintertime is usually the slow time of the year for lenders. But the latest slide extends a run that started two years ago and has carved away nearly three-quarters of the home-mortgage business.”

He added that, “things remain uncertain in the near future, with the potential for interest rates and inflation to go either way, but the spring buying season will be a key indicator of whether things may turn around.”

The across-the-board slump in mortgage activity continues to reflect a combination of economic forces that have helped to stall the nation’s decade-long housing market boom and, by extension, damaged the mortgage industry. Those forces include mortgage rates that doubled last year, high consumer price inflation, a historically tight supply of homes for sale, and broad economic uncertainty. They have combined to make refinancing or borrowing against home equity far less attractive, while also raising the cost of buying a home and limiting purchases.

Key Highlights

  • Banks and other lenders issued a total of 1,248,280 residential mortgages in the first quarter, the fewest since the fourth quarter of 2000. That was down 19.4% from 1.55 million in the fourth quarter of 2022, 55.6% YOY, and 70% from the most recent high point of 4.15 million hit in early 2021. 
  • A total of $387.8 billion was lent in the first quarter, down 19.8% from $483.7 billion in the fourth quarter and down 58% from $923.8 billion in the first quarter of 2022.
  • Overall lending activity in the first quarter decreased from the fourth quarter of 2022 in 167 (97%) of the 173 metropolitan statistical areas around the U.S. with a population of 200,000 or more and at least 1,000 total residential mortgages issued in the quarter. It was also down annually in every one of those metro areas. Total lending activity dropped at least 15% quarterly in 109 of the metros with enough data to analyze (63%).
  • The largest quarterly decreases were in Buffalo, N.Y. (total lending down 47.6% quarterly); Albany, N.Y. (down 46.4%); Toledo, Ohio (down 43.5%); Knoxville, Tenn. (down 42.7%), and St. Louis (down 39.1%).
  • No metro areas with a population of at least 1 million saw total lending rise from the fourth quarter of 2022 to the first quarter of 2023. Smaller metro areas where lending did increase quarterly included Fort Myers, Fla. (up 27.8%); Lakeland, Fla. (up 21%); Sarasota-Bradenton, Fla. (up 6.6%); Augusta, Ga. (up 6.1%) and Montgomery, Ala. (up 1.6%).
  • Refinancing activity decreased from the fourth quarter of 2022 to the first quarter of 2023 in 163 (94%) of the 173 metro areas around the U.S. with enough data to analyze. It dropped quarterly by at least 15% in 100 of those metros (58%) and was down annually in all of them.
  • Refinance packages comprised just 32.7% of all loan originations in the first quarter of 2023, down slightly from 32.2% in the prior quarter, but down 52.8% from the first quarter of 2022 and 66.2% in the first quarter of 2021.
  • Lenders originated 595,253 purchase mortgages in the first quarter of 2023, down 18.6% from 731,083 in the fourth quarter of 2022, the sixth drop in the last seven quarters. It also was off 44.3% from 1.07 million a year earlier and 60% from a peak of 1.49 million in the second quarter of 2021.
  • The $215.7 billion dollar volume of purchase loans in the first quarter of 2023 was down 18% from $263 billion in the prior quarter and 44.5% from $388.8 billion a year earlier.
  • Residential purchase-mortgage originations decreased from the fourth quarter of 2022 to the first quarter of 2023 in 154 (89%) of the metro areas in the report, and declined in 99% annually.
  • The largest quarterly decreases were in Buffalo (purchase loans down 53.8%); Indianapolis, Ind. (down 46.5%); Anchorage, Alaska (down 45.4%); St. Louis (down 45.4%) and Rochester (down 44.8%).
  • The biggest decrease in metro areas with a population of at least 1 million in the first quarter of 2023 (aside from Buffalo, Indianapolis, St. Louis and Rochester) came in Minneapolis, Minn. (down 38.1%).
  • The largest purchase-lending increases from the fourth quarter of 2022 to the first quarter of 2023 in metro areas with a population of at least 1 million were in Tucson, Ariz. (up 16.9%); Tampa (up 5.3%); Orlando (up 4.8%); Detroit (up 4%) and Phoenix (up 3.7%).
  • Home-purchase loans comprised 47.7% of all loan originations in the first quarter, virtually the same as the 47.2% portion in the prior quarter but up from 38% in the first quarter of 2022 and 29.2% in early 2021.
  • A total of 245,071 home-equity lines of credit (HELOCs) were originated on residential properties in the first quarter, down 23.1% from 318,557 in the prior quarter, the second consecutive drop-off following a string of increases in the prior year and a half. The latest HELOC total also was down 4.7% from 257,215 in the first quarter of 2022.
  • The $45.8 billion volume of HELOC loans in the first quarter was down 25.3% from $61.3 billion in the fourth quarter of 2022 and down 11.9% from $51.9 billion in the first quarter of 2022.
  • HELOCs comprised 19.6% of all loans in the most recent quarter — down from 20.6% in the prior quarter but still four times the level in the early part of 2021.

“Home-equity borrowing had been the only thing even partly propping up the home-loan business in the past year as owners were taking advantage of rising equity to draw cash out of their properties for home improvements or other expenses or investments,” Barber said. “Now, that also is clearly taking a hit.”

HELOC originations decreased from the fourth quarter of 2022 to the first quarter of 2023 in 94% of the metro areas analyzed. No metro areas analyzed with a population of at least 1 million saw quarterly increases in HELOCs.

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 the author
David Krechevsky was an editor at NMP.
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