Lending Fell In Q2, Q3 For The First Time Since 2000

Mortgage lending declined in both Q2 and Q3 2021, the first consecutive decline in two years and the first time since 2000 that lending fell in Q2 and Q3, according to ATTOM’s Q3 2021 U.S. Residential Property Mortgage Origination Report.

The report showed that 3.59 million mortgages secured by residential property originated in Q3, up 3% YOY but down 8% from Q2. It is the largest quarterly drop in more than a year, and a surprise considering the second and third quarters are usually peak buying season.

Lenders overall issued $1.15 trillion in mortgages in Q3, up 11% YOY but down 6% from Q2, the first quarterly drop since early 2020.

Both refinance and purchase lending fell, with refinancing taking the biggest hit. Purchase loans dropped 2% from Q2, but remained up by 17% from the year prior. 

Refinancing saw a drop of 13% from Q2– the largest drop in three years– and 3% YOY. Refinances still account for most residential lending activity, but its share of the market dropped from 59% to 55%.

“The overflow stack of work that was hitting lenders for several years shrank again in the third quarter across the U.S. amid a few emerging trends,” said Todd Teta, chief product officer at ATTOM. 

“It looks more and more like homeowner’s voracious appetites for refinance deals has eased notably, while purchase lending also dipped. It’s still too early to say if the trends point to major shifts in lending patterns or the broader housing market boom. But the drop-off is significant, especially for home buying, which could suggest an impending housing market slowdown. We will be watching the lending trends extra closely in the coming months.”

The report is alarming in a moment when demand for housing seems insatiable. But some industry pros are blaming low inventory, not waning demand, for the declines.

“There are not enough inventory of homes,” real estate broker Jim Allen told WRAL TechWire. “The shortage of housing is responsible.”

A new Zillow report found that despite builders’ best efforts, the completion of new homes has stalled, with the number of homes permitted but not started up 44.8% YOY.

“This isn’t a new boom cycle of new construction so much as it’s an attempt to get even from the last bust. There is still a long way to go to catch up from more than a decade of slow construction, and some markets have longer to go than others,” said Zillow senior economist Jeff Tucker.