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Refinance Lending Continues Powering Unusually Strong Home-Mortgage Activity Across U.S.

3.77 million mortgages secured by residential property (1 to 4 units) were originated in the…

  • August 30, 2021

3.77 million mortgages secured by residential property (1 to 4 units) were originated in the first quarter of 2021 in the United States, according to a new report from property database curator ATTOM Data Solutions.

That figure was up 3 percent from the previous quarter and 71 percent from the first quarter of 2020 – to the highest level in more than 14 years.

The increase also marked the first time that the total number of home mortgages rose from a fourth-quarter period to a first-quarter period since 2009.

With residential mortgage interest rates remaining around 3 percent for most purchase and refinance loans, lenders issued $1.16 trillion worth of mortgages in the first quarter of 2021 – up 5 percent from the fourth quarter of 2020 and 81 percent from a year ago, to the largest quarterly amount since at least 2000.

The continued increase in mortgage activity during the first quarter of 2021 resulted from the latest jump in refinance mortgages, which outpaced declines in home-purchase lending and home-equity lines of credit. Refinance lending has more than doubled over the past year.

The 2.55 million home mortgages that lenders refinanced in the first quarter of 2021 represented a 12 percent increase over the fourth quarter of 2020 and a 113 percent spike over the first quarter of 2020. The dollar amount of refinance loans rose to $777.5 billion, a 14 percent increase from the previous quarter and a 114 percent jump from a year ago.

Homeowners taking advantage of low interest rates to roll over old mortgages into new ones continued to comprise the majority of home loans in the first quarter of 2021.

They accounted for 68 percent of all home loans, up from 62 percent in the fourth quarter of 2020 and 54 percent in the first quarter of 2020, to the highest level since the first quarter of 2013.

That contrasted with home-purchase lending, which decreased 7 percent from fourth quarter of 2020 and home-equity-credit-line activity, which went down 27 percent.

Dollar volumes of purchase and HELOC lending also declined, by 6 percent and 34 percent, respectively.

While the number of loans issued to buyers dropped less than usual for a first-quarter period, as declines in both purchase-mortgage and HELOC activity fell more in line with what usually happens during the first quarter of the year.

The overall strong home-lending numbers in the first quarter of this year represented yet another measure of how the U.S. housing market has staved off financial damage caused by the ongoing worldwide Coronavirus pandemic. Job losses have hit middle- and upper-income households less than others, leaving them more able to take advantage of low interest rates to buy homes or refinance their mortgages.

Refinance mortgage originations up 12 percent from fourth quarter

Lenders issued 2,549,126 residential refinance mortgages in the first quarter of 2021 – the most since the third quarter of 2003. The latest figure was up 11.6 percent from the fourth quarter of 2020 and 113.2 percent from the first quarter of last year. The dollar volume of refinance packages rose to $775.5 billion in the first quarter of 2021, up 13.6 percent from the previous quarter and 114.1 percent from a year ago.

Refinancing activity increased from the fourth quarter of 2020 to the first quarter of 2021 in 166, or 78.7 percent, of the 211 metropolitan statistical areas around the country that had a population greater than 200,000 and at least 1,000 total loans in the first quarter of 2021.

HELOC lending down 27 percent from the prior quarter

A total of 187,029 home-equity lines of credit (HELOCs) were originated on residential properties in the first quarter of 2021, down 27 percent from the previous quarter and down 34.2 percent from a year earlier. The latest count marked the lowest point since the first quarter of 2013.

The dollar volume of HELOC loans dropped to $37.76 billion, a 33.7 percent decline from the fourth quarter of 2020 to the first quarter of 2021. That was the largest quarterly decrease since at least 2000.

Median down payments and amounts borrowed decrease

The median down payment on single-family houses and condos purchased with financing in the first quarter of 2021 was $18,700, down 19.6 percent from $23,250 in the previous quarter but still up 41.1 percent from $13,250 in the first quarter of 2020. The latest figure marked the first decrease since the first quarter of last year.

Historical Media Down Payment Trends

The median down payment of $18,700 represented 6.1 percent of the median sales price for homes purchased with financing during the first quarter of 2021, down from 7.4 percent in the previous quarter but up from 5 percent a year earlier.

Among homes purchased in the first quarter of 2021, the median loan amount was $260,587. That was down 4.5 percent from the previous quarter but up 12.9 percent from the first quarter of 2020.