Residential Loan Originations Jump 23 Percent Over Last Year in U.S.

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According to Irvine, Ca based RealtyTrac's latest Q2 2015 U.S. Residential Loan Origination Report, there were 1,950,267 loans were originated on single family homes and condos in the second quarter, up 22 percent from the previous quarter and up 23 percent from a year ago to the highest level since the third quarter of 2013.

The total dollar volume of loans originated in the second quarter was nearly $540 billion, up 14 percent from the previous quarter and up 29 percent from a year ago. Refinance originations represented nearly $307 billion in the second quarter, 56.7 percent of total loan origination dollar volume, and purchase loan originations represented nearly $234 billion, 43.3 percent of total origination dollar volume. As a share of total loan origination dollar volume, purchase originations reached a recent peak of 51.3 percent in the third quarter of 2014.

Of the more than 1.9 million loan originations in the second quarter, 737,824 were purchase loan originations, up 9 percent from a year ago. There were 1,212,443 refinance originations in the second quarter, an increase of 9 percent from the previous quarter and up 32 percent from a year ago.

"The rise in loan originations particularly the sharp rise in FHA purchase originations indicates the FHA premium reduction at the end of January really is having a big impact, pushing people off the fence to purchase," said Daren Blomquist, vice president at RealtyTrac. "The average loan amount for FHA purchase loans increased from $187,718 in the first quarter of 2011 to $197,315 in the second quarter of 2015 (a 16 quarter high), as the lower FHA premium gave those buyers more buying power."

Conventional, Jumbo, FHA, HELOC and FHA loans all see gains in the second quarter

There were a total of 1,203,722 conventional and jumbo loan originations in the second quarter, representing 61.7 percent of all loan originations. Conventional and jumbo loan originations increased 18 percent from the previous quarter and increased 17 percent from a year ago. Conventional and jumbo purchase loan originations in the second quarter increased 3 percent from a year ago, while conventional refinance originations increased 3 percent from the previous quarter and increased 30 percent from a year ago. The average value of homes purchased using conventional and jumbo loans increased 10 percent from a year ago.

There were a total of 326,143 Federal Housing Administration (FHA) loan originations - typically low down payment loans utilized by first time homebuyers in the second quarter. FHA loan originations increased 50 percent from the previous quarter and were up 46 percent from a year ago. FHA loan originations represented 16.7 percent of all loan originations in the second quarter, up from a 13.6 percent share in the previous quarter and a 14.1 percent share a year ago to the highest share since the second quarter of 2010.  FHA purchase loan originations in the second quarter spiked 73 percent from the previous quarter and were up 36 percent from a year ago, while FHA refinance loan originations were up 32 percent from the previous quarter and were up 58 percent from a year ago. The average value of homes purchased using an FHA loan increased 1 percent from the previous quarter and was up 13 percent from a year ago.

There were a total of 118,807 Veterans Administration (VA) loans originated in the second quarter, representing 6.1 percent of all loan originations. VA loan originations in the second quarter were up 12 percent from the previous quarter and up 39 percent from a year ago. VA purchase loan originations in the second quarter increased 45 percent from the previous quarter and were up 11 percent from a year ago, while VA refinance originations decreased 7 percent from the previous quarter but were up 83 percent from a year ago.

There were a total of 118,807 Home Equity Lines of Credit (HELOC) originated in the second quarter, representing 14.4 percent of all loan originations. HELOC originations were up 20 percent from the previous quarter and up 22 percent from a year ago. HELOC purchase originations were up 21 percent from the previous quarter and up 78 percent from a year ago while HELOC refinance originations were up 20 percent from the previous quarter and up 20 percent from a year ago.

Markets with biggest increases in loan originations in Alabama, California, Virginia
Metro areas with a population of at least 500,000 and the biggest increase in loan originations from a year ago were Birmingham, Alabama (up 197 percent), Oxnard, California (up 58 percent), Minneapolis, Minnesota (up 51 percent), San Jose, California (up 50 percent), Los Angeles, California (up 50 percent), San Diego, California (up 49 percent) and Richmond, Virginia (up 48 percent). 

Other major markets among the top 20 for biggest year-over-year increase in loan originations included San Francisco, California (up 47 percent), Sacramento, California (up 46 percent), Denver, Colorado (up 46 percent), Riverside, California (up 41 percent) and Seattle Washington (up 39 percent).

"Total loan originations year-over-year are higher in the Seattle area primarily due to refinancing rather than home purchases. Many homeowners are scrambling to refinance before interest rates rise, as they're expected to do in the fall," said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. "The growth in FHA loans in the Seattle region tells us two things. First, it's indicative of a market where prices are rising at a rapid rate. It also tells us that first time buyers, buoyed by a thriving economy and a belief in the housing market, are now dipping their toes into the water."

Markets with biggest increases in purchase loan originations in Alabama, California and Florida
Metro areas with a population of at least 500,000 and the biggest increase in purchase loan originations from a year ago were in Birmingham, Alabama (up 190 percent), Cape Coral, Florida (up 31 percent), Richmond, Virginia (up 30 percent), Augusta, Georgia (up 30 percent), Tampa, Florida (up 30 percent) and Minneapolis, Minnesota (up 29 percent).

Other major markets among the top 20 for biggest year-over-year increase in purchase loan originations included Orlando, Florida (up 28 percent), Sarasota, Florida (up 27 percent), Dayton, Ohio (up 24 percent), Atlanta, Georgia (up 22 percent) and Miami, Florida (up 19 percent).

"Our second quarter South Florida written contracts are at a record pace, up 16 percent from a year ago," said Mike Pappas, CEO and president of Keyes Company, covering the South Florida market.  "This should translate into a surge in loan originations in the third quarter. First time home buyers are picking up the slack from the decline in investors and taking advantage of the reduced FHA fees."

On the other end markets with the biggest decrease in purchase loan originations from a year ago were Greenville, South Carolina (down 43 percent), Buffalo, New York (down 21 percent), New Orleans (down 21 percent), Cleveland, Ohio (down 13 percent) and Tucson, Arizona (down 11 percent).

"While closed sales volume continues to increase across most Ohio markets in 2015, there has been a noticeable trend of increasing cash transactions and low down payment FHA loans, providing a declining number of conventional loans being utilized to fund the growth of real estate transactions. The growth of cash transactions can be contributed to investors as well as empty nesters wishing to leverage equity in a low inventory, and very competitive purchase market," said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. "The increased use of low down payment FHA loans is due to millennial and boomerang buyers, wishing to take advantage of lower down payment and loans with more forgiving considerations for bruised credit issues. The question remains if proposed federal regulatory changes coming in October, will continue in adding more pressure to a declining conventional loan market, and equally provide added hindrance to purchasers attempting to utilize FHA loans to accomplish their goal of the American dream."