Rate lock volume in June fell for the third month in a row, according to Black Knight’s Originations Market Monitor report…(Black Knight)
- M-O-M: Rate lock volume was down 11% in June when compared to May.
- Y-O-Y: Rate lock volume was down 41.2% when compared to the same time last year.
Refinance lock volume continues to be the loss leader thanks to a 13.2% drop in cash-out refis and a 9.1% drop in rate/term refis. Cash-outs and rate/terms are now down 42.2% and 90.4%, respectively. The refi share of the market held at just 18%, the lowest point on record since at least January 2018.
- NOTE: Purchase activity fell 10.8% from May and is now down 15.6% year-over-year.
The good news for investors and the overall economy is that slowing activity has not caused a drop in lending standards. The average credit score for purchases fell two points to 730 in June. this is only one point lower when compared to the same time last year. Rate/term refis actually saw a three-point jump from May to 734, this is now two points higher than the same time last year.
- NOTE: Cash-out’s average score fell five points to 693 which is not 35 points lower than the same time last year.
Scott Happ. President of Optimal Blue, said that the originations market has taken a hit thanks to significantly higher rates…
- “The month’s data illustrates just how interest rate-dependent the originations market has become…we’ve seen the rate/term refi market dwindle to next to nothing, with increasing downward pressure on cash-out activity. Purchase volumes are driving 82% of all origination activity and those volumes are on the decline as well – in the heart of the traditional homebuying season. Eventually, equilibrium will return; but, as of June, the market seems to be having trouble adjusting to a rate environment anywhere above the historically low levels reached during the pandemic.”
I think the big takeaway from this report was the evidence that falling demand might finally be impacting home prices. I say might because declining loan amounts could just mean bigger down payments. The average loan amount fell by $8,000 from last month to $351,000 in June. This was after a smaller $3,000 drop in May. We have barely seen a decline in home price growth better yet a pullback of prices. However, it is important to remember that most home prices data lags about three months and with economists like Selma Hepp predicting “a rapid deceleration in the rate of growth over the coming year.” It is not surprising that loan amounts are begging to fall.