Trends analytics suggest an uptick as consumers come to terms with the new norm in rates
What soft housing market? Toward the end of arming lenders with data to help overcome market challenges, one analytics provider’s quarterly lending report suggests a “surge” in loan volume could be ahead for the spring homebuying season.
The newly released Maxwell Quarterly Mortgage Lending Report yields market perspective based on trends over more than $200 billion in loan volume from more than 250 small- to mid-sized lenders. Mortgage Professional America recently interviewed the company’s CFO Bob Groody and senior product manager Josiah Feuerbacher for further insights into what the analytics and insights from loans transacted within the Maxwell platform might suggest for the broader market.
“When we released the report, we were looking at early January data and we saw a bit of leveling off as it related to the last few months of data that we’ve seen in terms of overall loan volume,” Feuerbacher told MPA. “That leveling off was a good sign, knowing that January is not typically a big buying season. So we expected a little bit of a lift in the later part of the quarter, and we’ve seen that come to pass over February and March. We’ve seen this slight uptick in overall volume. This leads us to believe that we will see a bit of an uplift in the spring buying season.”
What’s impacting the homebuying market?
The showing is attributable to a number of factors, but principally it’s illustrative of a collective reckoning as consumers acclimate to a new reality: “The leveling off and consistency of the rates over the last three months is a big piece of that where homebuyers are finally coming to terms with those new numbers and that new norm,” Feuerbacher said.
Groody expounded on the scenario while placing things in perspective: “I think it’s also advisable to think of the environment coming from the end of 2022 into the early part of 2023,” he said. “The viewpoint that the data does suggest is the ability for things to start moderating to the good is a good way to take away the rate market, the volume market, the loan amount market. Those kinds of things all lend themselves to the same viewpoint that good doesn’t mean great.”
Indeed, amid a backdrop of uncertainty over virtually uncharted waters, even the nomenclature tends to warp: “Any uplift at this point is good for the market,” Feuerbacher said. “A surge at this point is not the same surge we saw before. It’s a relative surge, but it’s good to see the market could have the seasonal uptick. It will breed additional confidence in buyers that, yes, now is a good time to get out there not only potentially for a new purchase but also if you’re looking for home equity loans or something along those lines.”
Will the market improve in 2023?
Groody added to that psychological phenomenon among acclimated consumers: “When you look at the impact that everybody saw but didn’t feel in 2022 about the rapid rise in rates, the consumers’ expectations and discipline is not as reactive to the negative as it was when those things first started to happen. Time settled some of that out. It is not incorrect to think that even with the rise in rates, therefore rise in payment, that in some markets the ability for the price point of a home to come down a bit levels out that area of concern to the borrower, the consumer, as we think about the market.”
Among the report’s more salient highlights were:
- Credit scores averaged 750 in December 2022 and January of this year - slightly lower than the previous year’s scores.
- Median debt-to-income ratio (DTI) has risen from 37% to 40%, which could indicate more relaxed criteria for borrowers.
- Purchase applications are up 28% since November 2022 as buyers return to the market - after loan volume declined by a quarterly average of 26% in 2022
- Loan amount has decreased by 11.2% from Q1 2022 to Q4, falling from $354,287 to $314,577.
- The average rate locked in in January 2023 was 6.33%, indicating a return to recovery after 2022’s rate highs.
