Elevated interest rates have significantly impacted mortgage refinancing over the past three years. While there was hope for lower interest rates in 2024, they haven’t materialized yet. However, refinancing activity has shown an 11.4% year-over-year growth, although it remains down 1.9% from the fourth quarter of 2023 and significantly lower than 2021’s peak.
Key points to note:
- The year-over-year increase is partly due to a short-lived 2023 spike.
- Refinancing originations are down 82.1% compared to early 2021.
- Optimism exists for a Fed rate cut in September, but any increase in refinancing and lending activity might be limited by prevailing interest rates.
- Refinancing originations totaled 490,953 in Q1 2024, up from 440,890 a year ago. The loan volume was $149.6 billion, seeing a 1.2% decline from Q4 2023 but a 4.7% increase year-over-year.
Overall residential lending remains down:
- Loans for home purchases decreased 12.3% year-over-year and 9.9% from Q4 2023.
- Home equity lines of credit fell by 13.9% year-over-year despite an increase in homeowner equity.
Refinancing activity increased in 82% of metro areas. However, some cities faced sharp declines, including Honolulu, Fort Myers, and St. Louis. Conversely, cities like Wichita, Virginia Beach, and Knoxville saw significant increases.
Inventory issues persist as median home prices rise, impacting affordability and perpetuating the “lock-in effect.” Median home prices hit a new record of $396,000, while median monthly mortgage payments reached $2,781. Residential listings are up, but inventory is still low for the summer.
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