With refinances hitting a 10-year low, and purchase originations settling at a three-year low, overall loan originations during the first quarter of 2017 dropped sharply, according to ATTOM Data Solutions.
ATTOM’s U.S. Residential Property Loan Origination Report said more than 1.4 million loans were originated in the first quarter of 2017, down 30 percent compared with previous quarter and down 21 percent from a year ago.
The total dollar volume of loan originations in the first quarter was $347.9 billion, down 21 percent year-over-year and the lowest since the first quarter of 2014, the report found.
“Rising mortgage rates made qualifying for a home purchase more difficult and refinancing an existing home loan less attractive in the first quarter,” ATTOM Data Solutions Senior Vice President Daren Blomquist said in a release.
“Refinance originations in particular fell off a cliff in the first quarter to the lowest level in more than 10 years after posting double-digit percentage increases in the third and fourth quarters of 2016, indicating that some refinance demand was pulled forward late last year in anticipation of rising interest rates,” Blomquist said.
Blomquist said the report found some positive market trends.
“Despite the sharp drop in purchase originations, there were some encouraging signs in the data that a larger share of first-time homebuyers participated in the housing market in the first quarter: the share of FHA buyers increased from the previous quarter after two consecutive quarters down, and the median downpayment decreased following three consecutive quarters of increases,” he said.
“However, the data also indicates more homebuyers needed help to qualify for a home purchase in the first quarter. Nearly 22 percent of all single family purchase originations had multiple, non-married co-borrowers on the loan, up from 20 percent a year ago,” Blomquist added.
According to the report, first-quarter loan originations with the highest share of co-borrowers were found in Miami (40.2 percent); Seattle (37.4 percent); San Diego (28.9 percent); Los Angeles (28.2 percent); and Portland, Ore. (27.7 percent).
“Throughout Southern California housing affordability continues to be a contributing cause supporting what has been viewed as an extremely tight available listing market year to date,” First Team Real Estate President Michael Mahon said.
“Increased competition amongst buyers for low available listing inventory and increasing multiple-offer scenarios are driving down use of leveraging mortgages in support of resale transactions while driving increased use of all-cash offers to gain acceptance over competing buyers,” Mahon added.
Refinances for the quarter (675,899) declined 36 percent from the previous quarter and 22 percent from one year ago. Total refinance volume was $167.9 billion, down 39 percent from the previous quarter and down 26 percent from a year ago. The refinance level for the first quarter was its lowest since the first quarter of 2006.
In Seattle, for example, refinances during the first quarter dropped 17 percent from one year ago and purchase originations dipped 5 percent.
“Seattle saw the number of purchase and refinance loans decline significantly compared to a year ago, but the reasons are different for each loan type,” Windermere Real Estate Chief Economist Matthew Gardner said. “Purchase loans are down in part because of the decline in home sales due to very limited inventory. They’re also down because we’ve seen an increase in the number of all-cash home purchases. Rising interest rates can be blamed for the drop in refinance loans.”
Only five metropolitan areas had year-over-year increases in refinances during the first quarter. They were Kansas City, Mo. (up 41 percent); Lexington, Ky. (up 17 percent); Memphis, Tenn. (up 12 percent); Greenville, S.C. (up 2 percent); and Atlanta (up 2 percent).
Total purchase originations for the quarter (513,350) declined 29 percent from the previous quarter and 18 percent from one year ago. Total purchase volume for the quarter was $136.6 billion, down 27 percent from the previous quarter and down 14 percent from a year ago. The quarter’s purchase volume was a three-year low.
Twelve metropolitan areas had year-over-year increases in purchase originations in the first quarter. They were Hartford, Conn. (up 4 percent); Richmond, Va. (up 4 percent); Los Angeles (up 4 percent); Memphis, Tenn. (up 3 percent); and Tucson, Ariz. (up 1 percent).