Residential Lending Sinks To Lowest Point Since 2000

Residential lending is down in two-thirds of the U.S. and sitting at its lowest level since 2000.

That’s according to new data from ATTOM, which showed that 1.28 million mortgages secured by residential property were issued in Q1, a 6.8% decline from the previous quarter.

It’s the 11th decline in the last 12 quarters and the lowest level in 24 years.

Total lending activity is down 4.8% YOY and 69.3% from its high point in 2021. The declines impacted purchase, refi, and home equity lending activity.

Purchase loan activity, in particular, was down nearly 10%, while home equity fell by 9%. Refinances, which were already constrained, saw just a 1.9% decrease.

The first quarter soured many analysts’ hopes for a major market turnaround this year as the Central Bank made clear it would not cut rates in the early months of 2024.

Lack of inventory pushed home prices to new records in Q1 2024, forcing many Americans to abandon their homeownership dreams until purchase costs come down.

However, activity has picked up recently as rates cooled for a few weeks and listings saw improvement.

“There is reason to hope that we will see something of a turnaround when second-quarter data comes in, given the jump in lending activity that happened during the peak home-buying season of 2023,” said Rob Barber, CEO at ATTOM.

“But with little sign that interest rates are coming down, which could fire up refinance and HELOC lending, or that supplies of homes for sale are going up, any increase is likely to be limited.”

Americans are nervous about buying homes in a difficult housing market but still consider it an important milestone. Four in five adults believe owning a home is an important aspect of their lives, and Zoomers (62%) and Millennials (55%) said they think about buying a home at least once a week.

But rates remain top of mind and are still too high to encourage potential buyers to come off the sidelines. Rates hit 7.07% last week, causing purchase applications to slip.