Residential lending slump deepened at the end of 2022
Is a rebound coming?
The contraction in residential mortgage lending activity continued in the fourth quarter of 2022 amid rising mortgage rates, consumer price inflation, and other signs of economic uncertainty, according to ATTOM’s latest report.
When the average rate for a 30-year loan doubled to nearly 7%, lenders issued $476 billion worth of mortgages in Q4 – a 27% decrease from Q3 and a 57% decrease from Q4 2021.
Within the overall activity, refinances represented just one-third of overall loans (496,221 mortgages) at the end of 2022, with refi dollar volume plunging 73% from $158 billion a year ago. Purchase loans comprised almost half of all loans (708,739 mortgages) versus about 30 early in 2021.
“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 US housing market continued to stall after a decade of prosperity,” ATTOM chief executive Rob Barber said in the report.
Even home equity declined 16% in the last few months of 2022 to a total of 313,973. The drop followed growth in five of the previous six quarters, according to ATTOM.
“The severe contraction across the lending industry in the fourth quarter even hit HELOCs, which was 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 in the report.
Barber noted that rates have settled back down a bit so far this year, which could lure some potential home buyers back into the market, especially if prices keep dropping, and spur some renewed refinance and HELOC action.
“The direction of interest rates this year will dictate whether HELOC activity stays high as a portion of overall activity or household returns to cash-out refinancing deals to help pay for big-ticket expenses,” Barber added.
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