The originations business landscape is shifting and your business should ready to face it .Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about Building The Next Generation Of Tech: Three Ways To Digitize Home Lending. This week we’re bringing you:
Mortgage applications for new homes down in September*
Average loan size increases as cost of building a new home rises
Purchase mortgage applications for new homes were down 16.2% in September compared to a year ago, according to Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data released on Tuesday. This is also marks a 4% decrease from the prior month.
Based on data from the survey, MBA estimates that there were 66,000 new single-family home sales in September, compared to 71,000 new single-family homes a month prior, a 7% decrease.
The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.
“New home sales purchase activity was weaker in September, and the average loan size rose to another record high, as homebuilders continue to grapple with rising building materials costs and labor shortages. The survey-high average loan size of $408,522 is evidence of higher sales prices from these higher costs, as well as the shift in new construction to larger, more expensive homes,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “The estimated pace of new home sales decreased 3.5% last month after a strong August reading, but the two-month sales pace is at its strongest since January 2021.”
Construction Numbers Fall Back from August Levels*
Both permits and housing starts fell in September following an unanticipated increase the previous month. Where the August gains were driven primarily by strong multifamily construction activity, a decline in that sector hurt the September metrics.
Permitting was especially weak, with the lowest seasonally adjusted annual rate since September 2020’s nearly identical number. Permits were issued at a rate of 1.589 million compared to a revised rate of 1.721 million in August, a decline of 7.7 percent. The August permits were originally reported at a rate of 1.728 million. As noted, there was no change from a year earlier.
The forecasts for permits from analysts polled by Econoday all exceeded the reported number, ranging from 1.620 million to 1.725 million units. The consensus from both Econoday and Trading Economics was a 1.680 million permitting rate.
Single family permits were down 0.9 percent from the previous month, at an annual rate of 1.041 million units compared to 1.050 million (revised from 1.054 million) in August and 7.1 percent below the rate a year earlier. Permits for multifamily construction (units in buildings containing five units or more) fell 21.0 percent from August to 498,000 units but remained 18.0 percent higher than the rate in September 2020.
On a non-adjusted basis 134,900 permits were issued, 87,400 of them for single family houses. In August, the respective numbers were 154,600 and 93,500.
For the year-to-date (YTD), permits have totaled 1.303 million, a 22.7 percent increase over the 1.062 million issued over the same period in 2020. Single family permits total 863,100, annual growth of 21.0 percent and multifamily permits are up 27.2 percent.
Construction starts in September fell back by 1.6 percent from the downwardly revised rate of 1.580 million (from 1.615 million) in August to an annual rate of 1.555 million. This was 7.4 percent above the September 2020 rate of 1.448 million.
The originations landscape is shifting – is your business ready?*
The purchase market is about providing product expertise and service excellence while maintaining timelines
Last year saw a record-breaking $3.83 trillion in mortgage originations, according to the Mortgage Bankers Association (MBA), as interest rates plunged, and COVID-19 accelerated an ongoing exodus from cities to the suburbs. While 2021 volume is expected to slow somewhat, the purchase market appears to be on pace to surpass refinances, the MBA said.
HousingWire recently spoke with Jon Gerretsen, SitusAMC Managing Director of Residential New Originations and Fulfillment Services, about the home buying boom and how lenders can gain market share and drive profitability in a white-hot purchase mortgage market.
HousingWire: How has the shift from a refi to a purchase market changed the dynamics for lenders?
Jon Gerretsen: Lenders have already had to compete for market share in an era of increasing costs, greater regulatory demands and volatile interest rates, while quickly adapting to new remote-work protocols sparked by the pandemic.
As the market shifts from a refinance-driven market to a purchase-driven market, lenders have had to adapt again due to the difference in sourcing leads and the intricacies of financing purchase transactions.
The underlying dynamics, timing and skill sets required to support purchase transactions are much more complex than a refinance, in which the primary focus is on the interest rate and associated closing costs.
In a purchase market, there are multiple stakeholders who have vested interests in the transaction – buyers, sellers, Realtors – and originators, all working under time-driven constraints including rate-lock commitments, mortgage-based contingencies and move-in/move out dates which all rely on timely and accurate decisions.
All of this translates into the purchase borrower requiring increased touch points and service levels to fulfill these expectations. Additionally, homebuyers demand a fast and simple mortgage lending experience, similar to the other types of technology-driven solutions they enjoy in other aspects of their lives.
Given all the stakeholders involved, the purchase market is about providing product expertise and service excellence while maintaining timelines. It’s very easy to have a negative customer experience that can impair your brand.
Finding highly affordable leads to keep sales coming in
At iLeads, we have many great solutions for mortgage LO’s at a low cost. If you’d like to see how we can help you bring in consistent sales for a great price, give us a call at (877) 245-3237!
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