Sizing Up the Originations Market

United States home refinance originations have experienced a 16 percent increase in the third quarter of 2016. According to the Q3 2016 U.S. Residential Property Loan Origination Report created by ATTOM Data Solutions, more than 1.9 million loans began with U.S. residential properties in Q3, which boils down to 1 in every 4 units.

Over 800,000 refinance loans secured by U.S. residential properties were originated in Q3 2016, which is a 7 percent increase from Q2 and a 16 percent increase from 2015. Refinance originations accounted for 45.7 percent of all loan originations in the third quarter, which is up 42.1 percent in the previous quarter and up from 39.5 percent a year ago.

Daren Blomquist, SVP at ATTOM, explained the increase in home refinance originations and how the recent presidential election may have been a factor in homeowners deciding on securing low interest rates.

“The nominal increase in overall originations compared to a year ago masks divergent refinance and purchase loan origination trends during the quarter,” Blomquist said. “Refinance originations increased 16 percent compared to a year ago while purchase originations were down 11 percent and Home Equity Lines of Credit (HELOC) originations were down 6 percent. Uncertainty surrounding the outcome of the presidential election may have kept some would-be homebuyers on the sidelines while the prospect of rising interest rates following the election may have prompted many homeowners to refinance to lock in low interest rates.”

There were 101 metropolitan areas with at least 1,000 loan originations in Q3 2016. Cities with the biggest year-over-year increase in refinance originations were Oxnard-Thousand Oaks-Ventura, California (74 percent); San Diego, California (73 percent); San Jose, California (65 percent); Honolulu, Hawaii (64 percent); and Provo-Orem, Utah (63 percent). Other metro areas with a year-over-year increase of at least 50 percent were Seattle, Washington (56 percent); Portland, Oregon (up 54 percent); Boulder, Colorado (up 53 percent); Madison, Wisconsin (52 percent); and Phoenix, Arizona (51 percent).

Matthew Gardner, Chief Economist at Windermere Real Estate in Seattle, described the spike in homeowners who were refinancing in the Seattle market.

“Even before the election, we were seeing an increase in refinance activity in the Seattle area in anticipation of rising mortgage rates,” Gardner said. “The rapid rise in rates following the election only made this increase in refinance activity more dramatic.”

Gardner continued, “But mortgage rates aren’t the only thing driving these refinances. Rising home prices in Seattle have allowed some of those who were paying Private Mortgage Insurance to refinance to a loan without it. It also allowed for cash-out refinancing for those who prefer to improve their homes rather than move. This is a popular option in Seattle where the number of homes for sale is at historic lows.”

ATTOM collects the data found in the report from publicly recorded mortgages and deeds of trust in more than 950 counties, which is more than 80 percent of the nation’s population.

To view the full report, click HERE.