Mortgage Lending Activity Slumps Across Country To Lowest Point In Nearly Nine Years

WRE News

ATTOM, a curator of land, property, and real estate data released its fourth-quarter 2022 U.S. Residential Property Mortgage Origination Report, which shows that 1.52 million mortgages secured by residential property (1 to 4 units) were originated in the fourth quarter of 2022 in the United States. That figure was down 24% from the third quarter of 2022, marking the seventh quarterly decrease in a row, and down 55% from Q4 2021.

The ongoing decline in residential lending resulted from some of the largest downturns in both refinance and purchase loan activity this century along with the first drop in home-equity lending in a year. The contraction continued as the 11-year U.S. housing market boom stalled in the second half of last year amid rising mortgage rates, consumer price inflation, and other signs of economic uncertainty.

During a period when average mortgage interest rates doubled to nearly 7 percent for 30-year fixed loans, lenders issued just $476 billion worth of mortgages in the fourth quarter of 2022. That was down quarterly by 27% and annually by 57%.

Within the overall activity, there were 708,739 loans granted to home purchasers in the fourth quarter of 2022, down 26% from the third quarter of 2022 and down 45% from the fourth quarter of 2021. The dollar volume of purchase mortgages dropped 28% quarterly and 44% annually, to $257 billion.

On the refinance side, only 496,221 mortgages were rolled over into new ones. That was down 27% quarterly, and down 73% annually. The dollar volume of refinance loans was down 27% from the prior quarter and 73% annually, to $158 billion.

Even home equity loan activity dropped, by 16% in the last few months of 2022, to a total of 313,973. The decline followed growth in five of the previous six quarters.

“The lending industry experienced a triple-dose of hits in the fourth quarter of last year as mortgage rates kept rising to levels not seen in more than 15 years and the U.S. housing market continued to stall after a decade of prosperity,” said Rob Barber, chief executive officer at ATTOM. “Rates have settled back down a bit so far this year, going back and forth in small amounts. That could lure some potential home buyers back into the market, especially if prices keep dropping. It also could spur some renewed refinance and HELOC action.”

In another sign of how much lending patterns have changed over the past two years, refinance activity represented just one-third of overall mortgages at the end of 2022, compared to two-thirds as recently as the first quarter of 2021. Purchase loans, meanwhile, comprised almost half of all loans, versus about 30% early in 2021. Home-equity lines of credit, despite a decline, still made up one of every five mortgages in the fourth quarter of 2022, up from one of every 22 in the first few months of 2021.

Banks and other lenders issued a total of 1,518,933 residential mortgages in the fourth quarter of 2022 – the lowest number since the first quarter of 2014. The latest figure was down 24.5% from 2,010,609 in the third quarter of 2022 and down 55.2% from 3,390,801 in the fourth quarter of 2021. The total number fell for the seventh straight quarter, extending the longest run of declines this century, while the annual decline marked the largest since at least 2001. The $475.5 billion dollar volume of loans in the fourth quarter was down 26.8% from $649.2 billion in the prior quarter and was 56.7% less than the $1.1 trillion lent in the fourth quarter of 2021.

“The severe contraction across the lending industry in the fourth quarter even hit HELOCs, the one major sector that had been holding up well earlier in the year as homeowners were using elevated equity from the real estate boom to finance home improvements and other things,” Barber said. “The direction of interest rates this year will dictate whether HELOC activity stays high as a portion of overall activity or households return to cash-out refinancing deals to help pay for big-ticket expenses.”

The full report from ATTOM can be found here