According to data from ATTOM Data Solutions, there were 1.25 million mortgage originations secured by residential properties (1 to 4 units) in the first quarter of 2023. As compared to Q4 2022, this figure was down by 19% and also marked the eighth quarterly decrease in a row. When compared to the year prior, the number of mortgage originations was down by a whopping 56%! Not surprisingly, the number of refinanced loans has also dropped considerably. In fact, the number of mortgage refinances was down by 18% over the previous quarter, by 73% over the prior year, and by 85% since Q1 2021.
What’s causing the decrease in mortgage originations?
There are a number of factors that have contributed to the decline in mortgage originations. Of course, the most common reasons are:
- Higher home prices: Needless to say, the rapid rise in home prices has essentially priced out many would-be home buyers in the market.
- Rising mortgage interest rates: Of course, in order to attempt to slow inflation, The Federal Reserve has raised interest rates several times in recent months, and this has made it more expensive to borrow money to buy a home.
- Inflation: You don’t need to venture too far to quickly realize that the prices of virtually everything have risen uncontrollably. As a result of these inflationary pressures on households, it has been substantially more difficult to save money for a home purchase. Therefore many of these potential home buyers have remained on the sidelines.
What is the future for the mortgage market?
It is difficult to say what the future holds for the mortgage market. The market is likely to remain volatile in the months ahead, as the economy continues to recover from the pandemic. Of course, where mortgage rates go from here will be dictated by inflation and how The Federal Reserve responds to it. However, there are some positive signs that the market may be starting to stabilize. Home prices have begun to slow their growth, and interest rates are expected to stabilize in the near future. This could lead to an increase in mortgage originations in the second half of 2023.
For the most part, home-equity borrowing has been the largest source of activity for the mortgage market over the past year. The reason for this has been because homeowners have been taking advantage of rising equity to draw cash out of their properties for home improvements or other expenses or investments. Of course, it is also important to remember that even though mortgage rates are considerably higher than they were a few years ago, they are still relatively low from a historical perspective. For example, mortgage interest rates reached an annual average of 16.63% in 1981!
Are you thinking about buying a property in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download the free Florida Home Search app for your mobile device.