Origination activity continues to sink as the market corrects, with refinances seeing major drops.
Black Knight’s October 2022 Originations Market Monitor report found that rate lock dollar volume dropped 14.3% month-over-month to its lowest level since February 2019.
Refinances have been hit especially hard, making up just 14% of all origination activity in October.
Cash-out refis, which had previously seemed resilient due to widespread equity gains, fell 25.1% from September and are down 83.6% YOY.
Rate/term refis sank an additional 15.7% and are now down 92.6% YOY.
“With interest rates now at their highest level in 20 years, the refi market is rapidly approaching a bottom,” said Scott Happ, president of Optimal Blue, a division of Black Knight.
“Indeed, our most recent Mortgage Monitor report showed that the number of borrowers with rate incentive to refinance has hit an all-time low of around 130K, and the vast majority of those are at least 14 years into a 30-year mortgage, with little incentive to restart the clock.”
Purchase lending continued to spiral, down 13% from the month prior and 39% YOY.
Rates rose 34 BPS through the month to 7.06%, their highest point in 20 years. Purchase lock counts saw a 37% dip YOY and were down 26% from pre-pandemic levels in 2019.
ARMs made up 13.1% of October’s lock activity as homebuyers searched for ways to lower their monthly payments. This is up 11.3% from September.
“Despite home prices continuing to pull back in a growing number of markets across the country, the current rate environment means affordability remains a thorny challenge. It’s therefore not very surprising to see a resurgence of somewhat lower-rate loan products like ARMs,” Happ said.
The average purchase price and average loan amount both dipped, to $423,000 and $337,000, respectively. Prices are expected to tumble in the coming months as buyers flee the market.
“Once you start the process of prices falling nationally, there is a self-fulfilling momentum to it because no one wants to catch a falling knife,” Diane Swonk, chief economist at KPMG, told Fortune.
“We’re easily going to see large double-digits declines. I think 15% next year is very conservative. We’re already turning.”
This is bad news for non-bank lenders who have less funding than major banks and have seen their credit lines cut as demand dwindles.
Non-banks are struggling to ride out the changing market, leading to mass layoffs and bankruptcies.
Banks with other revenue avenues can cut mortgage lending without too much damage to their operations and return later when demand is up.
Follow Us On Twitter:
Read More Articles:
You Can Get A Mortgage At Walmart
Fleeing To Florida For Freedom: Some Who Moved During Pandemic Were Seeking More Than Warmer Weather
First Home Mortgage Launches New Program For First-Time Homebuyers