Factors That Defined Housing in 2020

Many of the factors that defined 2020's state of the housing market—low mortgage rates, dwindling inventory, and a refinancing frenzy, to name a few—have been exhaustively reported. LendingTree's VP and Chief Economist Tendayi Kapfidze dug a little deeper to explore other mortgage and housing trends including what kind of borrowers got home financing, how mortgages were structured, and how Americans managed debt.

The full report is on LendingTree.com, but here a few things stand out.

One of the first topics Kapfidze touches upon is homeownership and equity. He points out that Americans have amassed $20.4 trillion in home equity, adding that equity isn't necessarily equal.

"Although Americans have a staggering amount of home equity, real estate wealth is becoming increasingly concentrated in the hands of fewer homeowners as overall homeownership rates fall."

He goes on to mention the mildly surprising fact that fewer Americans own homes today than in 2004.

"In 2004, 69% of all Americans owned homes. Today, that number has fallen to 65.8%."

The economist says mortgage origination levels have recovered from their housing crisis lows.

"In 2008, financial institutions originated just $1.4 trillion in new mortgages. However, by 2016, new first-lien mortgages topped $2 trillion. Though that number fell in subsequent years, it rose to $2.38 trillion in 2019 and continued to rise to $2.49 trillion through the third quarter of 2020."

From where are borrowers securing the most loans? Kapfidze says that in 2010, three banks (Wells Fargo, Bank of America, and Chase) originated 56% of all mortgages.

"Since 2010, though, the number of mortgages originated by nonbanks has increased; nonbanks, with more lenient lending standards now originate the majority of mortgage loans," he said.

The role of federally controlled lenders has changed, he notes.

"As private securitization firms exited the mortgage landscape, programs from the Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) have filled in some of the void," Kapfidze said. "FHA and VA loans can help qualified borrowers get loans despite having smaller down payments or lower incomes and credit scores. FHA and VA loans accounted for 17.4% of all loans issued in Q3 2020, down from 19.5% compared to the same period in 2019."

What sort of credit it takes to secure a loan has been a moving target of sorts over the past decade. Today, the pandemic might be contributing to tightening standards.

"As of November 2020, the median FICO Score for a newly originated mortgage was 786. Though the credit score needed to be approved for a mortgage varies, this high median score can be attributed in large part to tightening lending standards in the wake of the COVID-19 pandemic," Kapfidze said.

The pandemic among many things has impacted delinquency rates, which were 2.8% in Q3 2020, well below the 2010 peak of 11.5%.

"These low rates in the face of recession can be attributed to a variety of factors, including an uptick of mortgages in forbearance as well additional unemployment benefits supplied by the government."

In Kapfidze's words, here is a summary of the study's further findings:

Total mortgage debt as of Q3 2020: $10.8 trillion

Average mortgage balance as of April 2020: $151,686

Average new mortgage balance as of 2019: $285,434

Homeownership rate (share of owner-occupied homes) as of Q4 2020: 67%

Homeowners with a mortgage as of 2019: 63%

Median credit score for a new mortgage as of Q3 2020: 786

Average down payment made as of Q3 2020: $15,023

Mortgages originated in 2019: $2.38 trillion

Share of purchase mortgages originated by nonbank lenders as of Q3 2020: 69%

Share of refinance loans originated by nonbanks as of Q3 2020: 73%

Share of mortgages with a delinquency rate of 30 days or more as of Q3 2020: 2.81%