Originations See Largest YOY Decline In Two Decades

Mortgage originations saw their largest annual decline in 21 years, further evidence that the housing boom is coming to an end.

Originations fell 47% YOY in Q3, according to ATTOM Data’s Q3 2022 U.S. Residential Property Mortgage Origination Report. Quarter-over-quarter they were down 19%, the sixth consecutive drop.

Lenders issued a total of $636.5 billion worth of mortgages in Q3. By dollar count, that’s down 22% from Q2 and 46% YOY. It’s the largest dip in loan dollar volume since at least 2001.

HELOC lending increased for the fifth time in six quarters, but the boost was overwhelmed by the slump in purchase and refinance origination.

“There are no surprises in this quarter’s loan origination numbers, as the unprecedented jump in mortgage rates has battered both the purchase and refinance markets,” said Rick Sharga, executive vice president of market intelligence at ATTOM. 

“Prospective homebuyers have been priced out of the market by the combination of 7% mortgage rates and higher home prices.”

Refinance activity was down 31% from Q2 2022 and 68% YOY. Lenders issued just over 660,000 refis, the smallest number since Q1 2019.

Refis have declined for six consecutive quarters. Sharga noted that refinance activity will likely decline further, as most homeowners have interest rates under 4%, far below today’s levels.

The HELOC bump came for both the number and value of home equity loans. The number of HELOCs jumped by 5% from Q2. One of every five mortgage deals was a HELOC, up from one in every 21 a year and a half ago.

Soaring home price appreciation has deepened the affordability crisis for buyers, but current homeowners have seen their equity reach record highs. Nearly half of mortgaged homes in the U.S. were equity-rich in Q3, and 94.3% of all mortgage holders have at least some equity in their homes.

Lenders are leaning into this area, with Movement Mortgage and Homepoint recently introducing new, speed-focused home equity products.

Homeowners have been shown to tap their equity to build even more wealth by sending their children to college, starting businesses, or investing further in housing. While using equity isn’t risk-free, it can have a significant real-world impact on individual and family wealth.