Spiking rates drive pullback in activity
Residential mortgage lending in the US took another hit in early 2024 as soaring interest rates and high home prices continued weighing on affordability and demand, according to a new report from ATTOM.
The number of residential mortgages originated fell 6.8% from the prior quarter to 1.28 million in the first three months of the year - the lowest level since 2000. Total lending activity was down 4.8% from a year ago and a staggering 69.3% below the recent peak in 2021.
“[High interest rates] continued to push up homeownership costs at a time when near-record home prices already were unaffordable for average wage earners,” the report said.
All major mortgage categories declined in the first quarter, the data showed. Purchase loans fell 9.9% from the prior period to around 565,000, while refinance deals dipped 1.9% to 491,000. Home equity lines of credit slid 9% to 222,000.
The $405.6 billion in total lending was down 4.8% from the fourth quarter and 4.5% annually.
Purchase mortgages remained the largest segment, accounting for over 40% of all loans despite the quarterly drop. However, refinance activity rose 11.4% from a year ago due to a short-lived jump in 2023, even as it remained 82% below the 2021 peak when mortgage rates were below 3%.
“With little sign that interest rates are coming down, which could fire up refinance and HELOC lending, or that supplies of homes for sale are going up, any increase is likely to be limited,” said Rob Barber, CEO at ATTOM.
FHA and VA loans accounted for over one-fifth of all mortgages as affordability pressures drove more buyers to seek government-backed financing. Meanwhile, the typical purchase loan amount hit a new high of $329,800 amid surging home prices, even as median down payments declined nearly 21% from the prior quarter to $26,700.
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The latest pullback left lending activity down in 69% of major US metro areas from the fourth quarter and 65% annually as the housing slump showed no signs of abating.
“There is reason to hope that we will see something of a turnaround when second-quarter data comes in, given the jump in lending activity that happened during the peak home-buying season of 2023,” Barber said.
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