Year In Review: Highs And Lows Of 2023


As 2023 comes to a close, industry leaders say there were some highs, but leaving this year behind won’t be a problem for many mortgage professionals.

ATTOM CEO Rob Barber said in the spring, as the peak homebuying season heated up, lenders nationwide enjoyed their first quarterly increase in mortgage activity after eight consecutive declines dating back to early 2021.

“The second-quarter rebound was huge as total loans shot up 22%. The spike was powered by across-the-board, double-digit gains in purchase, refinance, and home-equity credit line deals,” said Barber.

But the turnaround was quick lived, he said, as the numbers went back down in the third quarter, with overall activity decreasing by 3%. Only refinance lending remained up in the summer months.

After the latest down quarter, the total number of home loans across the U.S. sat an astonishing 63% below the figure from the first quarter of 2021.

“The dropoff left purchase lending down 50% from a peak hit in early 2021 and refinancing down 82%,” said Barber. “HELOCs were off 29% from a recent high point reached last year.”

Despite the latest decline, there is at least some reason for the mortgage industry to hope for a high note to end 2023.

“Interest rates have ticked down in the past few weeks and the fourth quarter has brought small increases during the final three months of most years over the past decade,” Barber concluded.

Rick Sharga, president and CEO of CJ Patrick Company, said the “highs” this year in the mortgage industry would be a short story but there have been some positive trends.

“One piece of good news that’s probably flying a bit under the radar is that mortgage delinquencies and foreclosures continue to be lower than average,” Sharga said.

According to the Mortgage Bankers Association Q3 National Delinquency Survey, total delinquencies represented only 3.62% of all mortgage loans, below the historical average of between 4-5%.

Sharga said the number of loans in foreclosure were also well below normal levels, with about 0.47% of loans in foreclosure at the end of the third quarter, compared to normal levels of between 1.0-1.5%.

“Both delinquencies and foreclosures are down year-over-year during a time when consumer loans, auto loans, and credit cards are all experiencing an uptick in late payments,” he noted.

The other ray of light amid all the darkness in the mortgage industry is that the Federal Reserve has backed off its previously hawkish posture towards rate hikes.

“It now appears that the Fed is done raising the fed funds rate and, in fact, has built in at least three rate cuts to its 2024 forecast,” said Sharga. “This means that mortgage rates are likely to come down over the course of the year, which in turn should lead to higher loan volume. In fact, even the recent dip in mortgage rates from 8% to under 7% has resulted in a jump in mortgage loan applications – so demand from prospective homebuyers will be there as the industry is able to lower rates.”

Despite the recent uptick, 2023 has been a dismal year in terms of mortgage loan activity.

According to ATTOM’s Third Quarter Mortgage Origination Report, purchase loan activity was off 25% year-over-year and down 50% from its peak in 2021.

“Higher mortgage rates and higher home prices have combined to make home purchase affordability worse than any time in at least the last 40 years, and the sales of existing homes will probably be below 4 million units this year – the lowest number since the Great Recession, and the primary reason mortgage purchase loan activity is suffering,” said Sharga.

Refinance activity, despite a recent increase, was also off 25% from the prior year and 81% from its peak.

“Virtually the only refi activity going on is for cash-out home equity loans,” he said. “But even home equity line of credit volume is down by 29% year-over-year due to high interest rates.”

This drastic drop-off in loan volume has resulted in massive layoffs in the industry.

According to data from the Bureau of Labor Statistics reported by the Mortgage Bankers Association, employment in the mortgage industry was down by 17% from its peak as of the second quarter of 2023, eliminating some 70,000 jobs – with more undoubtedly lost since then.

Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, said the low point in 2023 was mortgage interest rates hitting nearly 8%.

“During the early-pandemic years, buyers could finance a home at 2.65%. When mortgage interest rates hit nearly 8%, there was nearly a $1,000 difference for a monthly mortgage payment on the same $400,000 home. This was heartbreaking to buyers who struggled to have an offer accepted during the intense competition of the pandemic-induced housing boom,” Lautz said.

But she has hope. Lautz said the high point in the 2023 mortgage industry is the optimism moving into 2024 because mortgage interest rates will continue to decline next year.

“There is optimism moving into 2024, since mortgage interest rates are below 7% now and are expected to decline further in the coming year,” added Lautz. “Potential buyers who have been priced out are likely to move back into the market, and this is welcome news for the real estate industry, which has been frozen over the last year, because buyers cannot afford to purchase, and sellers are unwilling or unable to move from their current mortgage.”

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