Mortgage Origination Volume Fell 20% in Q4 2017

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Due mainly to falling refinance volume, resulting from higher rates, total mortgage origination volume dropped 20% in the fourth quarter of 2017 compared with the third quarter and was down 19% compared with the fourth quarter of 2016, according to ATTOM Data Solutions’ U.S. Residential Property Loan Origination Report.

Of the approximately 1.9 million (1,903,364) loans originated for residential properties (1 to 4 units), 818,158 were refinance loans – down 17% from the previous quarter and down 34% from a year earlier – while 791,637 were purchase loans – down 22% from the previous quarter and down 1% from a year earlier.

About 293,570 Home Equity Lines of Credit (HELOCs) were originated in the fourth quarter, down 25% from a nine-year high in the previous quarter and down 7% from a year earlier.

The report shows a sharp increase in the origination of construction loans, which jumped to a two-year high. A total of 29,357 construction loans (used to finance improvements to real estate) were originated in the fourth quarter – up 12% compared with the previous quarter and up 33% from a year earlier to the highest level since the third quarter of 2015.

Houston had the most residential construction loan originations among 42 metropolitan statistical areas analyzed for construction loan data in the report, with 4,241 originated in the fourth quarter – up 345% from a year ago to reach a study high.

Residential construction loan originations also spiked in the Texas metros of Beaumont-Port Arthur (up 2,135%); El Paso (up 787%); and Corpus Christi (up 126%).

Other metro areas with increases in residential construction loan originations included Kansas City (up 104%); San Francisco, Calif. (up 80%); San Diego, Calif. (up 57%); Jacksonville, Fla. (up 53%); and Orlando, Fla. (up 41%).

In a statement, Daren Blomquist, senior vice president at ATTOM Data Solutions, says while the rise in construction loans in part reflects homeowners reconstructing in the wake of hurricane Harvey in southeast Texas, “the widespread rise in construction loans in other parts of the country indicates that more homeowners are staying put and remodeling rather than trying to move up into another home that comes with a big down payment and probably a higher mortgage interest rate.”

The report also shows that – due mainly to rising home prices – the median down payment for a home increased 20% in the fourth quarter compared with a year earlier – rising from an average of about $18,000 to a record high of $19,100. That up 20% from $14,950 in the fourth quarter of 2016.

The median down payment of $18,000 was 7.1% of the median sales price of the homes purchased with financing during the quarter, down from a four-year high of 7.3% in the previous quarter but still up from 6.2% in there fourth quarter of 2016.

“The median down payment in the greater Seattle area of 14.1 percent is twice the national average and continuing to rise,” says Matthew Gardner, chief economist at Windermere Real Estate covering Seattle. “This is good news for homeowners in our market as it provides them with a layer of protection should home prices see a downturn in the future.”

Among 143 metropolitan statistical areas analyzed for down payments, those with the biggest median down payments were San Jose, Calif. ($268,000); San Francisco, Calif. ($174,500); Santa Rosa, Calif. ($123,450); Los Angeles ($119,800); and Ventura, Calif. ($107,000).

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