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Single-family residential loan originations were down 4 percent over-the-year in Q2 (totaling about 1.87 million during the quarter), according to the Q2 2016 U.S. Residential Property Loan Origination Report from ATTOM Data Solutions, parent company of RealtyTrac.
The over-the-year decline in residential originations was largely driven by a 12 percent decline in refinance originations during the quarter, the second consecutive quarter with an annual decrease.
One particular segment of the originations market has enjoyed continued success for more than four years, however. Home Equity Line of Credit Originations (HELOC) originations rose by 5 percent over-the-year in Q2, which was the 17th straight quarter that HELOC originations have increased year-over-year.
“Homeowners are increasingly tapping the home equity that many have built up during the last four years of rapidly rising home prices,” said Daren Blomquist, senior vice president at RealtyTrac. “Meanwhile those rapidly rising prices are also locking some non-cash buyers out of red-hot but high-priced markets, resulting in weaker purchase loan originations in places like Denver, San Francisco, Portland and Dallas. On the other hand, more affordable markets such as Cleveland, Kansas City and Boise are posting double-digit increases in purchase loan originations.”
The metros with the largest over-the-year increased in HELOC originations during Q2 (out of metros with a population of at least half a million and 5,000 total originations in Q2) were Dallas (36 percent increase), Birmingham (30 percent), Phoenix (28 percent), Sacramento (27 percent), and Seattle and Columbus with 25 percent each.
Rounding out the top 10 markets with the largest year-over-year increases in HELOC originations for Q2 were Provo-Orem, Utah; Denver; and Orlando, each with a 24 percent increase; and Cleveland with a 23 percent hike.
“The combination of rapidly rising home prices and historically low interest rates has resulted in a substantial increase in the number of homeowners taking out a home equity line of credit (HELOC) in the greater Seattle area,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “I believe the popularity of HELOCs compared to cash-out refinances is likely due to the fact that interest rates are traditionally lower for HELOCs. Additionally, if equity is withdrawn during a refinance, homeowners must begin paying back the funds immediately, whereas a HELOC allows you to use the funds as needed.”
HELOC originations were not the only origination segment that has been experiencing increases. Purchase originations were up 1 percent over-the-year in Q2, which was the eighth straight quarter with a year-over-year increase.
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