Mortgage Lending Slumps Again in Q4

ATTOM has released its Q4 2022 U.S. Residential Property Mortgage Origination Report, showing that 1.52 million mortgages secured by residential property —1 to 4 units— were originated in Q4 of 2022 in the U.S. That figure was down 24% from Q3 of 2022, marking the seventh quarterly decrease in a row, and down 55% from Q4 2021.

The ongoing decline in residential lending resulted from some of the largest downturns in both refinance and purchase loan activity this century along with the first drop in home-equity lending in a year. The contraction continued as the 11-year U.S. housing market boom stalled in the second half of last year amid rising mortgage rates, consumer price inflation and other signs of economic uncertainty.

During a period when average mortgage interest rates doubled to near 7% for 30-year fixed loans, lenders issued just $476 billion worth of mortgages in Q4 of 2022. That was down quarterly by 27% and annually by 57%.

Within the overall activity, there were 708,739 loans granted to home purchasers in Q4 of 2022, down 26% from Q3 of 2022 and down 45% from Q4 of 2021. The dollar volume of purchase mortgages dropped 28% quarterly and 44% annually, to $257 billion.

On the refinance side, only 496,221 mortgages were rolled over into new ones. That was down 27% quarterly, and down 73% annually. The dollar volume of refinance loans was down 27% from the prior quarter and 73% annually, to $158 billion.

Even home-equity lending dropped, by 16% in the last few months of 2022, to a total of 313,973. The decline followed growth in five of the previous six quarters.

“The lending industry experienced a triple-dose of hits in Q4 of last year as mortgage rates kept rising to levels not seen in more than 15 years and the U.S. housing market continued to stall after a decade of prosperity,” said Rob Barber, chief executive officer at ATTOM. “Rates have settled back down a bit so far this year, going back and forth in small amounts. That could lure some potential home buyers back into the market, especially if prices keep dropping. It also could spur some renewed refinance and HELOC action.”

In another sign of how much lending patterns have changed over the past two years, refinance activity represented just one-third of overall mortgages at the end of 2022, compared to two-thirds as recently as Q1 of 2021. Purchase loans, meanwhile, comprised almost half of all loans, versus about 30% early in 2021. Home-equity lines of credit, despite a decline, still made up one of every five mortgages in Q4 of 2022, up from one of every 22 in the first few months of 2021.

Total lending activity continues to plummet

Banks and other lenders issued a total of 1,518,933 residential mortgages in Q4 of 2022 – the lowest number since Q1 of 2014. The latest figure was down 24.5% from 2,010,609 in Q3 of 2022 and down 55.2% from 3,390,801 in Q4 of 2021. The total number fell for the seventh straight quarter, extending the longest run of declines this century, while the annual decline marked the largest since at least 2001. The $475.5 billion dollar volume of loans in Q4 was down 26.8% from $649.2 billion in the prior quarter and was 56.7% less than the $1.1 trillion lent in Q4 of 2021.

Overall lending activity decreased from Q3 of 2022 to Q4 of 2022 in all 191 of the metropolitan statistical areas around the U.S. with a population of 200,000 or more and at least 1,000 total residential mortgages issued in Q4 of 2022. It was down annually in all but one of those metro areas. Total lending activity dropped at least 25% quarterly in 83 of the metros with enough data to analyze (43%).

The largest quarterly decreases were in Honolulu, HI (total lending down 47.7%t from Q3 to Q4 of 2022); Knoxville, TN (down 47.6%); Buffalo, NY (down 42.2%); Charleston, SC (down 40.1%) and Beaumont, TX (down 36.3%).

Aside from Buffalo and Honolulu, metro areas with a population of least 1 million that had the biggest decreases in total loans from Q3 to Q4 of 2022 were San Jose, CA (down 32.7%); St. Louis, MO (down 32.6%) and Seattle, WA (down 32.5%).

The smallest decreases from the third quarter to Q4 of 2022 in metro areas with a population of at least 1 million were in Tampa, FL (down 15.4%); Dallas, TX (down 15.5%); Orlando, FL (down 16.2%); Miami, FL (down 17.3%) and Baltimore, MD (down 19.2%).

Refinance mortgage originations hit low point this century

Lenders issued 496,221 residential refinance mortgages in Q4 of 2022 – the smallest count since at least Q1 of 2000.

The latest number was down 26.7% from 676,662 in Q3 of 2022 and down 73.4% from 1,865,118 in Q4 of 2021 – the largest annual fall this century. It also was off 81.9% from a recent high of 2,744,363 in Q1 of 2021. As with total lending, the number of refinance deals dipped for the seventh straight quarter, extending the longest run of declines this century.

The $157.9 billion dollar volume of refinance packages in Q4of 2022 was down 27.2% from $217 billion in the prior quarter and down 73.5% from $595.3 billion in Q4 of 2021.

Refinancing activity decreased from the third quarter of 2022 to Q4 of 2022 in 186, or 97%, of the 191 metropolitan statistical areas around the country with enough data to analyze. It was down annually in all 191 of those metros. Refinance lending dropped quarterly by at least 25% in 106 metro areas (55%).

The largest quarterly decreases were in Madison, WI (refinance loans down 78.9% from Q3 to Q4 of 2022); Honolulu, HI (down 58.7%); Milwaukee, WI (down 57.7%); Springfield, IL (down 56.2%) and South Bend, IN (down 52.6%).

Aside from Honolulu and Milwaukee, metro areas with a population of least 1 million that had the biggest decreases in refinance activity from Q3 to Q4 of 2022 were Indianapolis, IN (down 43.5%); St. Louis, MO (down 40.7%) and Buffalo, NY (down 40.7%).

The only metro areas with sufficient data where the number of refinance loans increased from Q3 to Q4 were Peoria, IL (up 17%); Binghamton, NY (up 15.6%); Dayton, OH (up 6.1%); Ann Arbor, MI (up 4.3%) and Atlantic City, NJ (up 2.7%).

Purchase mortgages down 51% since 2021 high

Lenders originated 708,739 purchase mortgages in Q4 of 2022. That was down 26.1% from 959,244 in Q3 of 2022, and down 45% from 1,287,519 in Q4 of 2021.

The $257.5 billion dollar volume of purchase loans in Q4 of 2022 was down 28.4% from $359.9 billion in the prior quarter and 43.7% from $457 billion a year earlier.

Residential purchase-mortgage originations decreased from Q3 to Q4 of 2022 in 188 of the 191 metro areas in the report (98%) and dipped in the same number annually.

The largest quarterly decreases were in Madison, WI (purchase loans down 57.7%); Honolulu (down 53.9%); Knoxville, TN (down 50.4%); Lynchburg, VA (down 48.2%) and Lafayette, LA (down 41.7 %).

Aside from Honolulu, metro areas with a population of at least 1 million that saw the biggest quarterly decreases in purchase originations in Q4 of 2022 were Buffalo, NY (down 41%); Pittsburgh (down 35.5%); St. Louis (down 35%) and Rochester, NY (down 34%).

The only metro areas among those analyzed where purchase-mortgage lending increased from Q3 to Q4 of 2022 were Ocala, FL (up 12.7 %); Port St. Lucie, FL (up 3.2%) and Naples, FL (up 0.4%).

HELOC lending decreases after more than a year of gains

A total of 313,973 home-equity lines of credit (HELOCs) were originated on residential properties in Q4 of 2022. That was down 16.2% from 374,703 in the prior quarter. However, the latest number was still up 31.8% from 238,164 in Q4 of 2021.

The $60.1 billion Q4 2022 volume of HELOC loans was down 17% from $72.3 billion in Q3 of 2022 but still up 27.4% from $47.2 billion in Q4 of 2021.

Despite the Q4 decline, HELOCs still comprised 20.7% of all Q4 2022 loans – nearly five times the 4.6% level from Q1 of 2021.

“The severe contraction across the lending industry in the fourth quarter even hit HELOCs, which was the one major sector that had been holding up well earlier in the year as homeowners were using elevated equity from the real estate boom to finance home improvements and other things,” Barber said. “The direction of interest rates this year will dictate whether HELOC activity stays high as a portion of overall activity or households return to cash-out refinancing deals to help pay for big-ticket expenses.”

HELOC mortgage originations decreased from Q3 of 2022 to Q4 of 2022 in 83% of the metro areas analyzed. The largest decreases in metro areas with a population of at least 1 million were in Buffalo, NY (home-equity credit lines down 45.1%); Fresno, CA (down 39.%); San Jose, CA (down 38.9%); Sacramento, CA (down 35.5%) and San Francisco (down 35.2%).

FHA and VA loan portions up slightly

Mortgages backed by the Federal Housing Administration (FHA) rose as a portion of all lending for the fifth straight quarter. They accounted for 181,324, or 11.9%, of all residential property loans originated in Q4 of 2022. That was up from 11.3% in Q3 of 2022 and 9.8% in Q4 of 2021.

Residential loans backed by the U.S. Department of Veterans Affairs (VA) totaled 80,061, or 5.3%, of all residential property loans originated in Q4 of 2022. That was up from 5.2% in the previous quarter, although still down from 6% a year earlier.

To read the full report, including more data and methodology, click here.