WASHINGTON -- Home purchase lending hit a post-2007 high in the second quarter as low interest rates and growing consumer confidence continue to support the housing market.
"You are seeing the employment picture brighten," said Bob Walters, the chief economist for Quicken Loans.
He said consumers are more secure in their jobs and feel more comfortable because home prices are again on the rise.
"You go back a few years, people were still afraid home prices could fall again," he said. "So there is a physiological component that is making this home buying season more robust than in the past. Since the crash, this year is the most robust activity that we have seen."
Data from the latest CUNA Mutual Group Credit Union Trends Report revealed that credit union first mortgages grew by 1.3% during June. While that's down from 2.4% reported in June 2015, it represents 8.3% year-to-date growth. Adjustable-rate first mortgage balances were also up by a whopping 11.1% during the first two quarters of 2016, though that's still a slight drop from the 12.1% reported during the first half of 2015.
CUs now hold $341 billion in first mortgages and 3.6% of the entire mortgage market – up for 3.2% last June, CUNA Mutual said.
A Wells Fargo Securities report said existing home sales rose 1.1% in June to a 5.57 million unit rate, the strongest pace since February 2007. While new home sales for the first six months of the year are up 10.1% relative to the same period last year, the report said.
"June was a breakout month for home sales, with both new and existing home sales reaching fresh post-recession highs," it said.
Home prices were up by 1.1% in June, CUNA Mutual added, and 5.7% year-over-year, and the Core Logic Home Price Index – the source of CUNA Mutual's data – is now 44% above its low point from march 2011 and just 6.7% behind the peak set in April 2006.
"Home prices are expected to rise another 5% in 2016 and 4% in 2017. Therefore, home prices should reach new highs by the end of 2017," said CUNA Mutual.
Still, CUNA Mutual reported that existing home sales were up by 1.1% for June, compared to 3% last June, adding that "the housing market tightened as first time homebuyers entered the market and purchased 33% of all sales, the highest share in four years…Credit union mortgage lending should increase as improving financial positions among borrowers and rising incomes justify loosening credit standards. In addition, confidence in the housing market will return as the general economy strengthens and lingering memories regarding the most recent housing downturn fade from view."
More Good News to Come?
Credit unions aren't the only ones with a rosy outlook on the housing market.
Black Knight reported that lenders originated 1.1 million single-family purchase loans in the second quarter, up from 720,000 in the prior quarter.
"It was a particularly strong for purchase originations," said Ben Graboske, executive vice president at Black Knight Financial Services in Jacksonville, Fla.
Purchase mortgages totaled $297 billion in the second quarter, up from $195 billion in the first quarter.
"At $297 billion, second quarter purchase originations marked the highest level – in terms of both volume and dollar amount – seen since 2007," Graboske said in a press release.
He predicted that third quarter demand could see another boost due to the June 23 vote by British voters to exit from the European Union, which helped drive interest rates lower.
"We are expecting a pretty strong showing from the Brexit in the refi and probably the purchase numbers as well," Graboske said in interview this week.
The Black Knight data is based on purchase loans originated and closed in the second quarter as reported by mortgage servicers.
Loan data from the Federal Housing Administration, Fannie Mae and Freddie Mac shows the agencies endorsed or purchased just 681,000 single-family loans in the second quarter, up 13.5% from a year ago, but a far cry from the over million purchase estimates from others.
Yet it can take up to two months for lenders to transfer or sell newly originated loans to Fannie and Freddie, resulting in a lag in the reporting data.
When the agencies report their third quarter numbers, they might be picking up a lot of loans originated in the second quarter, Graboske said. "That is just the way the system works," he added.
The Mortgage Bankers Association projects approximately $275 billion in purchase loan originations for the second quarter, according to Joel Kan, MBA's associate vice president for industry surveys and forecasting. That is up from $243 billion in the second quarter of 2015.
MBA's weekly applications survey shows an average purchase loan amount of $304,000 for the same time frame. "It's not an apples to apples calculation, but that would indicate a loan count of about 916, 000," Kan said in a written response to a question on Wednesday.
Economists at CoreLogic are projecting that originations in 2016 will total $1.8 trillion, which would be the highest volume in five years.
It looks like the "pickup in origination volumes are going to be quite strong in the third quarter," said CoreLogic chief economist Frank Nothaft. "We are expecting an increase in purchase money mortgages and also a pickup in refis."
Aaron Passman contributed to this report
