Five mortgage trends that ruled the third quarter

What's going on in the mortgage industry today? With all the changing regulations and the unpredictable economy, it's hard to keep up with how housing fundamentals are doing.

Guaranteed Rate, one of the biggest retail mortgage lenders in the nation, has released a summary of mortgage trends in United States from its database of home loans during the third quarter. The Chicago-based company also dives into the housing data of four major cities. Here are five trends that showed the biggest impact during the last four months.

 National mortgage trends:

• Purchase volume continued to take a larger share of the home loan market nationally, rising to 73% of all loan volume in the third quarter compared to 63% of loan volume in the same period last year. Total refinancing volume dropped by more than a third year over year – indicative of the fact that the third quarter of 2013 was when the mortgage market began to account for higher interest rates.
• Adjustable rate mortgages (ARMs) continue to rise year over year, making up 13.2% of all loan volume in the third quarter 2014 compared to 10.7% of all loans in the third-quarter 2013. While ARMs tailed off slightly from the second quarter of 2014 (where they made up 16% of all loans), the continued, steady year-over-year increase in the share of the total volume indicates that home buyers are growing more and more comfortable with this option.
•  Housing prices continued to trend upward, with the median purchase price rising by 8.1% over the third quarter of 2013, and by 2.2% over the second quarter of 2014. Average real estate taxes and credit scores were both virtually unchanged compared to the prior year period.
•  The 30-year fixed mortgage remained far and away the most popular loan product again, with it accounting for 75% of total loan volume, up one percentage point from the same period in 2013. However, 15-year fixed loans dropped from 12% of overall loan volume in the third quarter of 2013 to 8% in the third quarter of 2014, the second consecutive quarter that has seen a similar year-over-year decline.
• Investment activity ticked down one percentage point year-over-year compared to primary residence loans, likely reflective of higher housing prices impacting deals available for real estate investors.

 
Local trends:

•  In Chicago, purchase volume rose year-over-year, to 75% of overall loan volume this past quarter from 67% in the third quarter of 2013. ARMs rose from 13% of overall loan volume during the same period of 2013 to 15% of overall during the third quarter of this year. Median home prices in the area rose by 10% year over year, the third consecutive quarter of double-digit percentage increases. While condo loan volume was steady year-over-year, detached home loan volume was up three percentage points in the third quarter.
•  In the New York City metro area, purchase volume rose from 62% of overall loan volume in the third quarter of 2013 to 75% for the same period in 2014. ARMs continued their increase in the region, making up 26% of all loan volume in the third quarter of 2014, compared to just 18% of loan volume for the third quarter of 2013. Median housing prices in the area continued to climb, up nearly 5% year over year. The 30-year fixed rate mortgages held steady at 67% of total loan volume, but the 15-year fixed loan fell out of favor locally, dropping to 5% of total loan volume in the area from approximately 11% of total loan volume in the third quarter of 2013.
•  In Southern California (includes both Los Angeles and San Diego), purchase volume was 48% of all loan activity in the third quarter of 2013 and rose to 53% of all loans in the same period in 2014. However, refinancing was up in this region compared to the second quarter of 2014, rising seven percentage points of overall loan volume. 30-year fixed loan volume dropped year over year from 77% of all loans to 73% of all loans, while ARMs had a second consecutive quarter of steady growth in the area, rising from 12% of all loan volume in the third quarter of 2013 to 19% in the third quarter of 2014.
•  In Boston, purchase volume rose to 74% of all loan volume in the third quarter of 2014, up from 69% of total volume for the same period in 2013. Refinancing also showed a recent rebound in this region, rising six percentage points of overall volume versus the second quarter of 2014. ARMs steadily increased year over year, from 13% of all loans to 16%. Median home prices in the area rose 10% compared to the same period a year ago.