Declining Loan Originations: Rising Prices & Limited Inventory Hurting Housing

Declining Loan Originations: Rising Prices & Limited Inventory Hurting Housing Plymouth Title Guaranty Corporation

After last year’s record-setting real estate year, 2022 is displaying declining loan originations and refinancing activity. Since the start of the coronavirus pandemic, the housing market took center-stage while home demand skyrocketed.

As the dust settles, the numbers now point in the opposite direction. As demand wanes. prices surge, and mortgage, refinancing, and loan applications began to decline.

The Numbers Behind Declining Loan Originations

Throughout the last few weeks, real estate statistics experienced a major shift. Mortgage rates fell this month but it wasn’t enough to stop overall mortgage applications from falling 11%. In addition, home purchase applications fell 12%. Refinancing applications decreased 10% (76% lower than at its peak mid-pandemic).

Mortgage Bankers Association Comments

All of this combined with steadily rising inflation has consumers becoming wary of spending, limiting the number of homeowners who can benefit from refinancing. In response, the Mortgage Bankers Association (MBA) lowered its forecasts and told lenders that the ‘mortgage boom’ of the pandemic is over in the face of declining loan originations. The MBA warns lenders to scale back operations to handle smaller volumes of applications.

This sudden decrease in applications is being deemed the result of steadily increasing interest rates from the record lows of 2020 and 2021. Interest rates on a 30-year mortgage increased 1.5% during the first quarter of this year, climbing to 5.46% by April, the highest since 2009.

Household Debt Increases Amid Declining Loan Originations

Despite the decline in mortgage applications, mortgage dead on American households is rising nearly 1.7% (+$266 billion) up to $15.84 trillion in the first quarter of 2022.

As a result of higher debt and inflation, declining loan originations are following suit.

Forecasts for the Future

As the housing market comes down from its two year high, housing prices are historically high, leaving experts predicting an inflection point where the market could shift back down, lowering prices as demand for homes lowers and inventory catches back up with it.

Experts are closely monitoring the declining loan originations. For the United States real estate market, the future remains slightly murky as we head into the later part of 2022.

For questions on the real estate market, contact the title and escrow specialists at Plymouth Title Guaranty Corporation.