About 1.8 million (1,813,691) loans secured by residential property (1 to 4 units) were originated in the first quarter, down 5% compared with the fourth quarter and down 3% compared with the first quarter of 2017, according to the Q1 2018 U.S. Residential Property Loan Origination Report from ATTOM Data Solutions.
Of those 1.8 million loans, about 666,00 were purchase loans, down 16% from the previous quarter but still up 2% from a year earlier, and about 800,000 were refinances, down 2% from the previous quarter and down 11% from a year earlier.
About 348,000 (347,875) home equity lines of credit (HELOCs) were originated on residential properties in the first quarter, up 18% from the fourth quarter and up 14% compared with the first quarter of 2017.
“Putting home equity to work is the name of the game in the 2018 housing market – both for current homeowners as well as homebuyers,” says Daren Blomquist, senior vice president at ATTOM Data Solutions, in a statement. “With interest rates rising and home price appreciation accelerating, current homeowners are increasingly turning to home equity lines of credit rather than refinances to tap their home’s equity. And given that median down payments rose more than four times as fast as median home prices over the past year, it’s not surprising that homebuyers are increasingly getting help from co-buyers – often in exchange for a share of their home’s future equity.”
According to the report, co-buyers accounted for 17.4% of all home sales in the first quarter, up from 16.3% from a year ago and up from 14.9% two years ago.
“Homeownership rates are still hovering around historic lows – even though lenders continue to offer more low down payment options,” says Michael Micheletti, director of corporate communications at Unison, a company that provides down payment assistance to homebuyers in exchange for a share of any future increase in the home’s value. “Letting people borrow more doesn’t make buying a home more accessible or affordable. It’s not surprising that in places like Seattle, the Bay Area, and other challenging markets buyers are looking at ways to increase their purchasing power, and reduce the amount of debt they are taking on. The sharing, co-buying and co-owning of a home movement will only grow as more millennials and Gen Z enter the marketplace.”
The average down payment for homes purchased by co-buyers nationwide was $56,911. That’s 46% higher than the average down payment of $38,915 for homes purchased by other homebuyers.
The average co-buyer down payment represented 15.3% of the average sales price, 35% higher than the 11.4% for other homebuyers.
Cities with the highest percentage of co-buyers in the first quarter included San Jose, Calif. (48.3%); San Francisco, Calif. (37.9%); Seattle (27.7%); Honolulu (27.7%); and Miami (27.6%).
Cities with the biggest year-over-year increases in HELOC originations included Athens, Ga. (up 176%); Chattanooga, Tenn. (up 165%); Norwich, Conn. (up 99%); Kingsport, Tenn. (up 92%); and Atlantic City, N.J. (up 87%).
“While there was early speculation that tax law changes related to home equity loans might dampen demand, that is not playing out in the market,” says Paul Doman, president and CEO of Accurate Group, which provides appraisal and title solutions for home equity lenders. “The strong HELOC growth in [the first quarter] is consistent with the results of our March 2018 Home Equity Lender Survey, in which lenders were nearly unanimous in their belief that tax savings is not the primary driver for HELOC demand. Demand for our home equity appraisal, title and closing solutions remains strong so far this year – an indicator that lenders are continuing to grow that portion of their business.”
