Mortgage originations increased in the second quarter, however borrowers are increasingly relying on the help of a co-borrower as home prices continue to rise, according to the latest Q2 2017 U.S. Residential Property Loan Origination Report released by ATTOM Data Solutions, a multi-sourced property database.
The latest report showed more than 2 million mortgages were originated on residential properties during the second quarter, an increase of 37% from the first quarter’s three-year low. However, this is still down 12% from the second quarter last year.
The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by ATTOM Data Solutions in more than 1,700 counties accounting for more than 87% of the U.S. population.
But as home prices rise, borrowers are increasingly relying on co-borrowers. The report found 22.8% of all purchase originations on single-family homes involved co-borrowers, multiple, non-married borrowers listed on the deed of trust. This is up from 21.3% in the previous quarter and 20.5% last year.
“Homebuyers are increasingly relying on co-borrowers to help with home purchases, particularly in high-priced markets where sizable down payments are necessary to compete,” ATTOM Senior Vice President Daren Blomquist said. “This rising trend in co-borrowing is helping to eke out increases in purchase loan originations despite affordability and supply constraints.”
Among the top 42 cities with at least 1,500 purchase originations on single-family homes, the metro with the highest share of co-borrowers was San Jose with 50.9%, followed by Miami with 45.2% and Seattle with 39.1%.
“Climbing home prices are forcing more and more borrowers to consider other options, such as leveraging a parent’s credit, in order to qualify to buy,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market.
“Given the ongoing concerns about the emergence of another housing bubble, it was encouraging to see that Seattle has the tenth highest average down payment in the U.S. at 14%,” Gardner said. “Such substantial down payments can act as a cushion in the unlikely event that home prices start to reverse the substantial gains that we’ve seen over the past several years.”
However, while rising home prices are forcing an increasing number of homeowners to find co-borrowers, Ten-X Executive Vice President Rick Sharga explains in the quick video below that there should be no concerns of a coming housing bubble.