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Q3 2021 Report: Examining Mortgage Trends

Mortgage lending has dropped in the second and third quarters of 2021, with finance mortgages dropping 13% and purchase loans off 2% for the first time this century.

According to ATTOM's Q3 2021 U.S. Residential Property Mortgage Origination Report, 3.59 million mortgages secured by residential properties were developed in Q3. Those figures were up 3% from Q3 of 2020, but down 8% from the Q2 of 2021. This amounted to the largest quarterly decline in over a year. 

ATTOM noted that the quarterly decrease showcased a couple of "unusual patterns developing in the lending industry." This shift represented the first time in over two years that total lending decreased across two consecutive quarters. Moreover, this was also the first time since 2000 that lending activity declined in both Q2 and Q3. That runs counter to the standard pattern for Q2 and Q3, which ATTOM notes are usually "peak buying seasons."

Overall, with average interest rates remaining below 3% for 30-year home loans, lenders issued $1.15 trillion worth of mortgages in Q3 of 2021. Although annually increased by 11%, quarterly percentages decreased by 6%, affecting the dollar volume of loans. Residential loans backed by the V.A. or VA accounted for 6.4% of all residential property loans established in Q3 of 2021, down from 6.9% in the previous quarter and 8.8% the prior year. 

Refinance mortgages rolled over 1.99 million home loans into new mortgages during Q3. This figure decreased 13% from Q2 and 3% year-over-year. The end total of refinance mortgages declined for the second straight quarter, while the quarterly decrease was the largest in three years. The dollar volume of refinance loans found itself 10% from Q2 of 2021, to $624.1 billion.  

The median down payment on single-family homes purchased with financing in Q3 stood at $27,500, up 5.8% from $26,000 in the previous quarter and up 41% from $19,502 in Q3 of 2020. The median down payment of $27,500 represented 8% of the nationwide median sales price for homes purchased with financing during Q3 of 2021. 

The number of purchase loans also declined in Q3 of 2021 as lenders issued 1.36 million mortgages to buyers. This represented a drop of 2% quarterly, although it was still up 17% annually. The dollar value of loans taken out to buy property dipped to $482.6 billion—down only 1% from the Q2 of this year, and up 30% from Q2. 

Despite the vast decline in refinance mortgages and loans, home-equity lending rose for the second straight quarter. The total of home-equity lines of credit, although down annually by 9% percent, rose 2% between Q2 and Q3 of 2021, to about 238,500. 

The continued dip in total loan activity during Q3 represented growing signs of the nation's desire for new home loans, and the possibility of heavy traction within the housing market may steady.  

Reversal of trends from 2019 through early 2021, when total lending activity nearly tripled, caused a surge in refinancing and purchasing. “It looks more and more like homeowner’s voracious appetites for refinance deals has eased notably, while purchase lending also dipped. It’s still too early to say if the trends point to major shifts in lending patterns or the broader housing market boom," said Todd Teta, Chief Production Officer at ATTOM. "We will be watching the lending trends closely in the coming months.” The spike came as interest rates dropped to historic lows along with the Coronavirus pandemic, spurring a rush of home buying among households looking for larger spaces and safety measured offered by a house and yard space. The rapid increase in buying drove home prices to record highs.  

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport, with more than six years of writing experience. She has served as Editor-in-Chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington. She has covered events such as the Byron Nelson, Pac-12 Conferences, the Women in Dallas Film Festival, to freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, she is an avid jazz lover and reader. She can be reached at [email protected]
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