Affordable mortgage rates? Loan originations fall to two-year low

RealtyTrac report shows first-quarter refinance originations down 20% from 2015

Despite the fact that mortgage interest rates routinely hovered around “historic” lows for much of the first quarter, loan originations fell to their lowest level in two years, according to a new report from RealtyTrac.

RealtyTrac’s Q1 2016 U.S. Residential Property Loan Origination Report, released Thursday morning, showed that there were 1,415,511 loans originated on residential properties (1 to 4 units) in the first quarter of 2016.

That’s down 12% from the fourth quarter of 2015 as well as down 8% from the same time period last year.

It’s also the lowest level since the first quarter of 2014.

RealtyTrac’s report, which is derived from publicly recorded mortgages and deeds of trust collected by RealtyTrac in more than 950 counties accounting for more than 80% of the country’s population, showed that much of the decrease stemmed from a large decline in refinance originations.

RealtyTrac’s report showed a 20% decrease in refinance originations from 2015 to 2016.

On the other hand, purchase originations increased 3% from a year ago and home equity line of credit originations rose 10% from 2015.

But that still wasn’t enough to make up for the lack of refinances.

“After a surprisingly strong 2015, the mortgage refi market started running out of steam in the first quarter of 2016 despite lower mortgage interest rates,” said Daren Blomquist, senior vice president at RealtyTrac.

“Meanwhile the purchase loan market continued the pattern of slow-and-steady growth that it has been following the past two years, and HELOC originations increased on a year-over-year basis for the 16th consecutive quarter, showing that borrowers are regaining both home value and the confidence needed to increasingly leverage their home equity,” Blomquist continued.

While the number of originations are down, the estimated total dollar volume of originations increased thanks to higher average loan amounts, RealtyTrac’s report showed.

According to RealtyTrac, there was an estimated $444.5 billion in total loan origination dollar volume in Q1 2016, up 5% from the previous quarter and up 5% from a year ago, which is the fifth consecutive quarter with a year-over-year increase in loan origination dollar volume.

The total dollar amount of purchase loans originated in the first quarter was an estimated $146 billion, down 11% from the previous quarter but up 8% from a year ago, RealtyTrac’s report showed.

Additionally, the total dollar amount of refinance loans originated in the first quarter was an estimated $204 billion, which was up 8% from the previous quarter but down 9% from a year ago.

The big increase came from HELOCs, which came in at an an estimated $95 billion in the first quarter, up 34% from the previous quarter and up 45% from a year ago.

According to RealtyTrac’s report, Cincinnati, Ohio (down 35%); Philadelphia, Pennsylvania (down 32%); Milwaukee, Wisconsin (down 32%); Raleigh, North Carolina (down 31%); and Salt Lake City, Utah (down 29%) represent the five markets where refinance originations decreased by the largest amount.

Other metro areas with a 25% or bigger decrease in refinance originations from a year ago were Oxnard-Thousand Oaks-Ventura, California (down 28%); St. Louis (down 28%); Sacramento, California (down 28%); Tucson, Arizona (down 27%); Louisville, Kentucky (down 26%); Chicago, Illinois (down 26%); Richmond, Virginia (down 26%); San Diego, California (down 25%); and Honolulu (down 25%).

The metro areas with the largest year-over-year percentage increase in purchase originations were Baltimore, Maryland (up 26%); Tucson, Arizona (up 18%); Louisville, Kentucky (up 17%); Minneapolis-St. Paul (up 14%); and Nashville, Tennessee (up 14%).

Other metro areas that saw purchase loan originations rise more than 10% from a year ago were Washington, D.C. (up 13%); Cleveland, Ohio (up 13%); Atlanta, Georgia (up 12%); Indianapolis, Indiana (up 12%); Kansas City (up 11%); St. Louis (up 11%); and Chicago (up 11%).

RealtyTrac’s report also showed that Federal Housing Administration loan share increased annually for the fifth consecutive quarter.

Among all purchase and refinance loans, 17.5% were FHA loans, 8.3% were Department of Veterans Affairs loans, 0.8% were construction loans, and the remaining 73.4% were other loan types, including conventional.

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