Consumers Forgo New Home Loans; growing market


Consumers in East Tennessee forewent new home loans in the last quarter of 2021, and the Mortgage Bankers Association (MBA) says the industry has entered an era of buying. Refinance loans still accounted for more than half of all local loans in the fourth quarter, but their market share is declining while purchase loans are increasing.

Welcome to today’s transitioning housing market and economy. It’s full of chaos and volatility. Demand is still high, prices are rising, but the headwinds are getting tougher. Yet the market is only showing signs of a slight slowdown.

New mortgages were down 10.8% from the previous quarter in the Knoxville Metropolitan Statistical Area (MSA); down 8% at Kingsport-Bristol; down 7% in Chattanooga MSA; and down 6.3% in Johnson City MSA. This lags behind the American image. The total number of mortgages issued fell for the third consecutive quarter. It included conventional, purchase, refinance and home equity loans, according to Attom Data Solutions.

Overall, lenders issued $1.06 trillion worth of mortgages in the fourth quarter. That was down 9% quarterly and annually. Only purchase loans remained up compared to the previous year.

The percentage of purchase loans to total loans in the Tri-Cities increased for three-quarters in both Tri-Cities metropolitan areas. Kingsport-Bristol had a slightly higher market share in the fourth quarter (51.7%) at 50.7% in Johnson City.

Refinancing began to outpace Tri-City home purchase lending in the second quarter of last year and as homeowners locked in the lowest mortgage rates in modern times. But that shine is starting to fade with mortgage rate hikes and the realization that more are on the horizon. The Russian-Ukrainian war weighed on the last two weekly averages. Still, the Fed is reportedly looking at a quarter-percent hike this month. Although the FED does not set mortgage rates, what it does with interest rates affects mortgage lending. And there are reports that some influential sources want a more targeted approach to raising mortgage rates.

“The decline in business volume for the residential mortgage industry is now showing across all major loan categories and appears to be more than just a temporary decline. The downward wave of refinance lending that began in early 2021 has fully spread to home purchase and home equity lending,” said Todd Teta, chief product officer at Attom. . “There is no doubt that total lending levels are still higher than normal amounts over the past decade. And the decline in purchase loans appears to stem from a lack of housing supply rather than the end of the property market boom. But the decline in business for lenders remains a key point to watch in assessing the state of the market, especially with interest rates likely to climb this year.

US mortgage applications fell 0.7% for the week ending Feb. 25 as mortgage rates hit 4.15%. Compared to the same week a year ago, requests fell 41.7%.

The MBA’s seasonally adjusted refi index rose 0.5% from the previous week, but fell 56.2% year-on-year. Meanwhile, the buy index fell 1.7% in a week and 8.6% in a year, according to a Housing Wire report.

The quarterly decline in mortgages is starting to show up in local sales this year. February Northeast Tennessee Association of Realtors (NETAR) reports that sales remained stable. This will likely continue into the final month of the first quarter as sales take precedence over continued growth.

Geopolitics, inflationary gas price increases, and house price increases are putting together formattable headwinds for buying and selling quality homes in the spring and summer. Some builders are rushing to get ongoing new home projects online as quickly as possible to meet continued high consumer demand. But there are also fears that some new homes could get stuck in the construction stages.

Current forecasts call for average inflation of 5% this year with an average mortgage rate of 4%.

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