Since pandemic began, 2x more refinances than new home loans in Triangle

RALEIGH – New data obtained by WRAL TechWire show that as the median home sale price of residential property in Raleigh, Durham, and across the Triangle continues to increase, there’s been a growing gap in one portion of the market that has persisted. But that could close in the future, as mortgage rates increase and fewer homeowners take advantage of increasing home equity and rising home prices.

What’s the gap? The difference in the number of new home loan originations compared to existing home refinances.

Since the onset of the global coronavirus pandemic, the total amount of mortgage refinances in the Triangle’s two metropolitan statistical areas (MSAs) has outpaced new home purchase loans, according to data from ATTOM Data Solutions.

In the Raleigh MSA, there have been a total of 94,282 mortgage refinances, starting in the second quarter of 2020 through the fourth quarter of 2021, the data show. Yet there have only been 44,769 new home purchase loans, the data show.

And in the Durham-Chapel Hill MSA, while there have been 14,205 new home purchase loans between the second quarter of 2020 and the fourth quarter of 2021, there have been 27,691 refinance loans processed.

Sales of ‘most affordable’ housing up, ‘luxury’ down, but home sale prices still increasing in NC

What’s happening?

When mortgage interest rates are low, and home values have increased, owners of residential property have a variety of options available to them, explained Nicole Bachaud, a Zillow economist, in a February 2022 interview with WRAL TechWire. In the Triangle, inventory throughout the prior two years has been at or near historically low levels, said Bachaud, which means many people who may otherwise consider purchasing a new home and listing their existing home for sale looked at the ultra-competitive market and decided to stay put.

While staying put, home values increased across the region, while mortgage rates remained low. These trends, in part, led to some owners refinance during the prior two years, said Bachaud.

“Interest rates going up, people typically think about the monthly payment, in terms of how much they’re actually paying,” said Bachaud. So while rates were low and values were increasing, homeowners who planned to stay in their homes could take advantage of a “mortgage rate lock-in,” said Bachaud, that could save homeowners “hundreds of dollars a month.”

In Wake County, there’s a growing gap in the real estate market

Raleigh: a growing gap

In the Raleigh-Cary metropolitan statistical area, there were a total of 21,55 loans initiated during the fourth quarter of 2021, up from the prior quarter by 2.7% but down 8.3% from the prior year when there were 23,516 total loans initiated during the fourth quarter of 2020, the data from ATTOM show.

According to the data set, in the Raleigh MSA, the peak total loans occurred in the first quarter of 2021, with 23,928 loans across all loan types, including purchase loans, refinance loans, and home equity line of credit loans.

The ATTOM data show that the majority of home loans initiated since the onset of the global pandemic aren’t due to a new home purchase. Instead, the data shows that nearly or more than half of the initiated loans were refinance loans, as existing homes across the Triangle continued to increase in value while mortgage rates remained near historic lows. The data show:

Q2 2020 – 11,005 refinance compared to 5,597 purchase
Q3 2020 – 14,182 refinance compared to 6,379 purchase
Q4 2020 – 15,461 refinance compared to 6,165 purchase
Q1 2021 – 16,871 refinance compared to 5,081 purchase
Q2 2021 – 13,085 refinance compared to 7,296 purchase
Q3 2021 – 12,060 refinance compared to 6,842 purchase
Q4 2021 – 11,618 refinance compared to 7,409 purchase

Data obtained by WRAL TechWire from the listing database Triangle Multiple Listing Service (TMLS) shows that, in Wake County, the median home sale price for any residential property listed through the provider was $435,000 in February 2022. That’s up a tick from the median home sale price in January 2022, according to a TMLS report, when the median price was $434,140.

Raleigh 4th, Charlotte 2nd, for greatest home price increases in U.S.

Home inventory low

The availability of homes for sale across the Triangle is historically low, with inventory in Raleigh down 50% year-over-year as of December 2021 compared to December 2021. But demand remains at an all-time high, while more and more leaders are concerned about housing affordability.

And data obtained by WRAL TechWire shows that across the 16-county region covered by listing database provider Triangle Multiple Listing Service, show that the number of homes for sale across the Triangle remains low, even as the region emerges from winter.

As of 12 p.m. on Tuesday, March 1, there were only 1,657 active listings or listings marked by the listing brokerage as “coming soon,” with 7,996 pending sales across the region, according to the TMLS data obtained by WRAL TechWire.

Looking to buy or refi? Now may be the time to ‘lock in’

Morgage rates a factor

“The market is still ultra competitive, with low inventory and high demand,” said Jon Enberg, Carolinas General Manager at Opendoor, an iBuyer that is active in the Triangle and Charlotte markets in North Carolina. “Listings are at an all-time low, significantly less than 2021 which was already a record low.”

And even though inventory was low in 2020 following the onset of the global pandemic, and this trend continued throughout 2021, Enberg noted that the “historically low mortgage rates” did enable new homebuyers to enter the market.

Mortgage rates fell this week, amid geopolitical tensions, so if you’re a homeowner who hasn’t yet refinanced a mortgage but is considering it, or a homebuyer who hasn’t yet locked in an interest rate, now might be a good time to do so.

But with mortgage rates potentially increasing later in 2022, which may occur after the Federal Reserve raises interest rates. And that could happen as many as three or four times in 2022, and come with quarter- or half-point increases. The result of that move is that it “may decrease the percentage of first-time homebuyers who purchase a home in 2022,” said Enberg.

“Given recent activity and forecasts, I don’t expect to see a dip in demand anytime soon,” said Enberg. “It’s likely the market may slow in 2022 due to multiple rate increases but we don’t see a dip. Supply is just too low.”

Triangle housing market: Demand at ‘all-time high’ but affordability at ‘all-time low’

It’s happening in Durham, too

In Durham-Chapel Hill, there were a total of 6,658 initiated mortgage loans across purchase loans, refinances, and home equity line of credit loans. That’s down 6.4% from the prior quarter, when there were 7,114 total loans. But the peak lending, in terms of total loans granted, came in second quarter of 2021, when a total of 7,257 loans were originated.

The data from ATTOM show that, for each three month period since the onset of the pandemic, refinance loans made up a large portion of the total loans originated in the Durham-Chapel Hill MSA. The data show: