#United States #Irvine #ATTOM #Mortgage Market #Home Loans

Decline in Home Purchase Mortgages Driving the Loan Market Downturn

In recent developments reported by ATTOM, a prominent expert in land data and real estate analytics, the first quarter of 2025 has witnessed a notable decrease in mortgage origination concerning residential properties across the United States. This decline, characterized by a 14 percent drop in new mortgage loans, is indicative of a broader trend affecting the housing and loan market. The report highlights that approximately 1.4 million mortgages were secured in this period, a stark contrast to previous quarters where numbers peaked at around 4.2 million loans in early 2021.

Key Factors Behind the Decline

The downturn in mortgage originations is attributed primarily to a 20 percent decline in loans for home purchases, with numbers dwindling from 738,675 in Q4 2024 to 593,111 in Q1 2025. This decreasing trend signals a shift in homeowner behaviors and market dynamics. Homeowners are increasingly opting for mortgage refinancing or utilizing home equity lines of credit (HELOCs) rather than financing new purchases.

As a result, the average dollar value of loans also saw a regression, dropping 18 percent to $478 billion in the first quarter, further emphasizing the reduction in borrowing and changing market composition. Loans for home purchases, which represented a majority of the mortgage market just a year ago, now make up only 41.4 percent. In contrast, mortgage refinancing and HELOCs are beginning to dominate market share, indicating a significant shift in residential financing preferences.

Nationwide Impacts Across Metro Areas

The decline in mortgage issuance is not isolated to specific regions but spans across 93.3 percent of metropolitan statistical areas analyzed by ATTOM. Only a minor fraction of cities reported growth in lending, showcasing a pervasive slowdown in mortgage activities nationwide. Notable reductions occurred in several key regions including Duluth, MN, and Fort Wayne, IN, where emissions plummeted by 35.6 percent and 34.6 percent, respectively. Conversely, areas like Asheville, NC, and Cape Coral, FL, witnessed an uptick in loan originations amidst the broader downturn.

Despite the slump in new loans, year-over-year comparisons reveal that many regions are still seeing increases compared to the same time last year, suggesting that while the market is retracting, it is not uniformly declining across all locales.

Analysis of Purchase Mortgages

The report underscores that the number of home purchase mortgages dramatically fell by 19.7 percent, with the total value decreasing from $293 billion to $234 billion. This sharp drop further illustrates the hesitancy among potential buyers, aligning with the trend of fewer than 1.6 million purchase loans recorded at the peak in mid-2021. Nearly 94.8 percent of analyzed metro areas experienced a decline in home purchase loans, highlighting a challenging environment for buyers in the housing market.

Refinancing Trends

While overall mortgage refinancing saw a 12.2 percent drop, it still holds a vital position within the market, with a 16.1 percent increase noted year-on-year. The refinement of existing mortgages appears to be a favored option for borrowers as evident from shifting patterns in metropolitan areas where refinancing remains more favorable than new purchases. Despite the fall, refinancing is likely to lead as the largest share of the home loan market if current trends persist.

Major drops in refinancing were mostly felt in metropolitan areas like San Jose, CA and Reno, NV, underscoring the uneven recovery across different regions. Nevertheless, increases were recorded in cities such as Lubbock, TX, showcasing localized variances in market behavior.

Home Equity Line of Credits (HELOCs)

HELOCs have also faced declines, albeit the drop being relatively minor at 4.5 percent. Year-on-year comparisons show a healthier outlook, as they boast a 13.9 percent increase relative to the same quarter last year. However, even HELOCs experienced significant fluctuations across various metropolitan areas, with the most considerable decreases occurring in Peoria, IL, and Fort Wayne, IN.

Overall, the ATTOM report presents a comprehensive picture of a shifting mortgage landscape in the U.S., marked by declining home purchase financing, increasing refinancing activities, and a need for homeowners to adapt to rapid market changes. As the year progresses, adjustments in borrower priorities are likely to continue influencing the mortgage sector in unforeseen ways.