Residential Mortgage Originations Surge in Q2

The second quarter of 2024 witnessed a significant surge in residential mortgage originations, with loans totaling nearly $533 billion. This marked a substantial increase of 27.6% compared to the first quarter and represented one of the largest boosts in the mortgage industry in recent years.

While this increase is encouraging, it is important to note that the overall level of lending activity remains below previous peaks. The total volume of residential loans in the second quarter was still down 1.6% from the same period in 2023 and a significant 61.2% from the peak reached in 2021.

The breakdown of loan types in the second quarter shows a strong increase in home purchase loans, up 32.7% to 783,000. Refinancing deals also experienced a modest increase of 10.3% to 546,000, while home-equity credit lines rose by 26.5% to 286,000.

Lending activity was on the rise in 98% of the 205 metropolitan areas analyzed by ATTOM. However, in 58% of these markets, lending levels remained below those of the second quarter of 2023. Some notable cities that experienced significant increases in lending activity include Boulder, Honolulu, Appleton, Sioux Falls, Champaign, San Jose, Minneapolis, Indianapolis, and Boston.

On the other hand, Pensacola, Buffalo, Atlantic City, and Springfield, IL, saw a decline in lending activity during the quarter. Over the past year, San Antonio, St. Louis, Austin, Dallas, and Buffalo experienced the most significant decreases among major metropolitan areas.

Nationally, the number of home purchase loans increased from 590,000 in the first quarter to 782,937 in the second quarter. The value of these loans surged by 39.2% to $223.4 billion. While this represents a significant increase, it is still below levels reached a year earlier and well below the 2021 peak.

The share of purchase mortgages within all loan originations rose for the first time in a year, indicating a shift away from refinancing deals. Refinancing activity also increased but remained at a lower level compared to previous years.

Home equity lines of credit (HELOCs) saw a significant increase in the second quarter, with a total value of $53.6 billion. This helped to offset some of the losses incurred in the previous year. HELOCs accounted for 17.7% of all loans during the quarter.

The share of FHA-backed loans and VA loans declined in the second quarter, suggesting a shift towards conventional financing options.

In addition to the overall increase in mortgage originations, the report also highlights a trend towards larger loan amounts and higher down payments. The median loan amount for homes purchased with financing rose to $368,207 in the second quarter, up 7.2% from the previous quarter and 8.4% from a year earlier. The median down payment also increased by 11.1% to $24,250, although it remained below its year-earlier level.

Overall, the second quarter of 2024 saw a significant increase in residential mortgage originations. While the overall level of lending activity remains below previous peaks, the positive trends in home purchase loans and HELOCs suggest a growing demand for homeownership and borrowing.

Conclusion

The residential mortgage market experienced a notable surge in the second quarter of 2024, with loan originations reaching nearly $533 billion. This increase was driven by a combination of factors, including rising home prices, low interest rates, and improving economic conditions. While the overall level of lending activity remains below previous peaks, the positive trends in home purchase loans and HELOCs suggest a growing demand for homeownership and borrowing. As the housing market continues to evolve, it will be important to monitor mortgage origination trends to understand the broader economic implications.

Courtesy: Philippa Maister

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