The July 2023 edition of At a Glance, the Housing Finance Policy Center’s reference guide for mortgage and housing data, includes four new permanent pages. These pages increase the breadth of topics covered by the chartbook and give more context for topics previously explored. The new pages cover how interest rates influence the share of refinanceable outstanding mortgages, new residential production and the share of units built for-sale by property type, year-over-year house price appreciation by location, and national-level homeownership rates, broken out by age and race and ethnicity.

Also inside this issue :

• Households’ housing equity contracted by 2.2 percent over the first quarter of 2023 (Page 6).
• The share of single-family loans that are 90 days or more delinquent or in foreclosure decreased by 8 basis points, from 1.89 percent in Q4 2022 to 1.81 percent in Q1 2023 (Page 28).
• Fannie and Freddie multifamily delinquencies have increased noticeably but remain low (Page 33).
• Year over Year House Price Appreciation has started to recover (Page 24).

HMDA 2022: KEY FINDINGS

Amid supply chain disruptions and demand-side shocks, consumer prices persistently grew at a pace exceeding the Fed’s threshold of price stability, 2.0 percent. In response to faster inflation, and low unemployment, the Fed began to tighten monetary policy by raising the federal funds rate and allowing its agency MBS holdings to run-off, contributing to higher mortgage rates.

Higher rates reduced the pace of mortgage lending, particularly among refinances (page 20). Recently, mortgage lending data collected under the Home Mortgage Disclosure Act (HMDA) were released for 2022. This new data gives mortgage industry stakeholders additional information on how activity evolved as rates were rising. And it can be compared to the 2019-2021 period when rates were significantly lower, as well as to 2018, the last monetary policy tightening cycle.

The July version of the At A Glance Chartbook includes four pages describing several key trends.

Denial Rates: Across all owner-occupied properties, denial rates rose from 15.6 percent in 2021 to 22.2 percent in 2022 (page 39). In 2018, the denial rate was 24.0 percent. The 2021-2022 change in denial rates was greatest among refinance applications. Over this period, the denial rate among refinance applications increased from 14.7 percent in 2021 to 24.7 percent in 2022. In contrast, the denial rate among purchase loans increased from 11.0 percent to 12.9 percent. But, while the denial rate among refinance applications rose more, its 2022 level remained below its 2018 rate. However, the purchase denial rate in 2022, 12.9 percent, exceeded its 2018 rate of 12.1 percent.

By property type, denial rates are persistently higher among 2-4 unit properties and manufactured homes as compared to one-unit properties (page 39). The denial rate rose across each property type between 2021 and 2022. Most notably, more than half of applications, 52.2 percent, to purchase a manufactured home were denied in 2022.

By race and ethnicity, denial rates overall were persistently higher among applicants of color relative to white applicants (page 40). In addition, applicants of color experienced a greater increase in denial rates between 2021 and 2022 compared to white applicants. Significantly, more than one-third, 35.5 percent of Black applicants for a refinance application were denied.

Originations: Purchase activity dominated the market in 2022, accounting for 60 percent of all mortgage originations. The share of loans originated as adjustable rate mortgages (ARM share) rose amid higher rates (page 10). The ARM share of the purchase market increased from 4 to 10 percent. The ARM share among rate-term refinance loans rose from 3 percent in 2021 to 9 percent in 2022 and from 2 percent to 5 percent among cash-out refinance loans (page 38).

The share of high-income home purchasers using a mortgage continues to expand, rising from 43.7 percent in 2021 to 44.3 percent in 2022 (page 41). In contrast, the share of low-to-moderate income homebuyers has been declining. The share of younger mortgage home purchases, those under 35, rose within the conventional channel and decreased in the government channel in 2022. This youngest cohort of mortgage home purchasers is a larger share of government loans than conventional ones. And, combined with mortgage home buyers aged between 35 and 44, the flow of purchase loans among this younger cohort exceeds their share of all homeowners.

The data indicate that the mortgage industry experienced a significant contraction in 2022. To-date in 2023, monetary policy remains “hawkish” continuing to drag on the industry. Industry forecasts expect full-year 2023 activity to be lower than even 2022. In 2024, the At A Glance Chartbook will provide additional insights on originations and denials from the 2023 HMDA.