Could a drop in new mortgages = a market slowdown?

A drop in mortgage loan originations
A decrease in mortgage loan originations could indicate a real estate market slowdown.

Historically low mortgage rates have been one of several reasons for the hot housing market over the past nearly two years. In addition to new home purchases, the home refinancing market has been on fire as well. However, in Q2 2021 we saw a 3% drop in the number of new mortgage originations. This was followed by an 8% drop in the number of new mortgage originations in Q3 2021. To put these numbers in perspective, this is the first time in over two years that we have seen consecutive quarterly decreases in new mortgage originations. When was the last time that mortgage originations dropped in both Q2 & Q3 in a given year? You would need to go back two decades to find the last time this happened.

Why the drop?

For starters, the drop in mortgage originations is to be expected after the record number or homeowners refinancing combined with the frenzy of home buying that has been taking place. In fact, many believe that a significant portion of homeowners have already taken advantage of refinancing their homes with lower rates. As an overall proportion of loans, refinances shrank from 59% of all loans last quarter to 55% of all loans this quarter. The median down payment amount continued to rise, reaching another high point dating back to 2005. On average, borrowers put $27,000 down on their homes, up almost 6% from last quarter and 41% over Q3 2020.


Real estate prices have been rising at an unsustainable pace for the past 18 months or so. With this said, the drop in loan originations is not entirely unexpected. For many would-be home buyers, prices have risen so much that they may temporarily be out of the market until they are able to save enough money for a down payment. Moving forward, all indicators point to a more settled real estate market. Of course, an increase in inventory of homes for sale will help to better balance the market.

At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., has been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!

By natasha moore

REALTOR® with Live South Florida Realty, Inc.

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