Lenders pump the brakes on mortgages, low-rates have positive-negative effect on housing

The gap between home purchase and refinancing loan originations narrowed in the four-county Kingsport-Bristol Metropolitan Statistical Area (MSA) during Q1. But not by much. Refi loans accounted for 38.6% of all mortgage loans, down from 43.9% during Q4.

The numbers will probably ebb lower in the Q2 report. COVID-19 has softened home sales, and lenders have pumped the brakes on applications. Mortgage availability has tightened as lenders impose tougher income, credit-score, and down-payment conditions and drop some loan types altogether, such as home-equity lines of credit (HELOC).

Refi originations have swamped local lenders since Q2 last year. Nationwide there were 1.07 million refinance mortgages secured by residential property (1 to 4 units). That’s down 16% from Q4 but up 87% from the first quarter of 2019, according to ATTOM Data Solution’s Q1 Mortgage Origination Report.

Refinance mortgages in Sullivan, Hawkins, Scott, and Washington Co. VA totaled 463 during Q1, down from 732 during Q4.

There were 486 purchase originations during Q1 compared to 642 in Q4.

Q1’s 1,199 total loan originations dropped to a 16-quarter low.

“Home-loan data was way up again in the first quarter of the year, with refinancing activity again accounting for more than half the total volume of mortgages. The number and dollar value of home loans marked yet another sign of how charged up the U.S. housing market continued to be in the early months of the year when everything was still pointing in the right direction,” said Todd Teta, chief product officer at ATTOM. “Unfortunately, that is all uncertain now due to the economic fallout from the virus pandemic that could throw the market into a downturn. But at least the market heads that uncertainty with some of the strongest home loans – and by extension, overall market – numbers since the aftermath of the last recession.”

 

ATTOM’s analysis tells some, but not all, of the local housing market story. The three-county Johnson City MSA was not included in the analysis since it didn’t meet the 200,000 population or at least 1,000 loan benchmarks. It’s another example of how the Tri-Cities marketplace is short-changed in many data situations because it’s a Combined Statistical Area (CSA) comprising two MSAs despite the fact that it’s a single marketplace.

First-quarter purchase, refinance, and HELOC originations underperformed Kingsport-Bristol’s five-year averages across the board. The bar is set at  5-year average because that’s when the region’s housing market began its record-setting sales pace.

The current analysis shows loan originations were at their lowest level since Q2 2017 by 178 mortgages.

Refinance originations were 260 off the previous high in Q3 2016.

HELOCs were down 511 from the previous Q1 2018 peak.

The recent surge of refi originations – driven by ultra-low mortgage rates – has and will have varied effects on the local housing market.

On the positive side, they are helping stabilize prices.  That’s enhancing confidence in the housing market. They’re also working to the advantage of buyers on a budget in a market where housing affordability has become an increasing issue. A recent check of listings found that only 1 in 3 listings in the Kingsport market was in the affordable range. That range is set by the ability of an average wage earner having the buying power to purchase a median-priced home

The low rates have also had a back-to-the-future effect when you compare the average mortgage payments. During Q1 this year, the average payment for a median price home in Kingsport-Bristol was $702. That’s the lowest it has been since Q2 of 2018 when the average was $784 a month.

But while the low rates have positive effects in today’s market, there’s a potential opposite in the future. Once interest rates reverse, their rush toward the bottom homeowners who bought in the current low-rate market might not be eager to sell. That could mean less mobility, and that translates into continued inventory shortages and increased affordability issues.



Categories: REAL ESTATE

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