Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets. This week, WRAL TechWire has new data and analysis on what’s happening with mortgage applications, mortgage interest rates, and why falling home sales mean we’re heading toward a housing market crash, all topics of this week’s reports. This column, exclusive to WRAL TechWire, is from Rick Sharga, the executive vice president of market intelligence at ATTOM Data Solutions, which this week, released a report on mortgage activity during the second quarter of 2022.
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RALEIGH – Mortgage interest rates moving up from sub-3% mortgages to loans between 5.5-6% have effectively shut off the refinance market.
Our ATTOM Data Solutions data for the second quarter shows a decline of 60% in refinance activity compared to last year, and that trend is very likely to continue for the rest of this year.
Here’s what we’re predicting: Refinance lending will largely be limited to cash-out refi loans for the rest of 2022 and through most of 2023. That means that we’re unlikely to see refi volume begin to increase until sometime in 2024.
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It’s a misperception we’re heading toward housing market crash
Higher rates have also caused an almost immediate fall off in home sales, as the combination of rising home prices and rising mortgage rates has made home purchases too expensive for many prospective buyers—especially first-time buyers, who don’t have equity to leverage—and made it difficult for a lot of borrowers to qualify for that more expensive mortgage.
One of the misperceptions that many people have is that rising mortgage rates cause home prices to fall; historically, this hasn’t generally been the case.
Instead, rising rates tend to cause home price appreciation to slow down—often dramatically—and that appears to be what’s happening today. The most likely scenario is not a housing market price crash, despite what you see on YouTube or read in headlines. The most likely scenario is this: Prices plateauing and then rising much, much more slowly than they have in recent years. How slow? Think 2-3% annual price increases rather than 20%. That would be much more in line with historical trends.
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What’s happening in North Carolina
North Carolina’s numbers in the second quarter were very interesting, when it comes to mortgage loan applications.
Let’s explore.
The drop off in refinance activity was very much in line with what ATTOM Data Solutions saw in the rest of the country. That is to say: nationally, refinance volume was down 60%, and Raleigh (64%), Durham (64%), and Wilmington (62%) were right in line with those numbers.
But refinance activity in those markets did drop faster on a quarter-over-quarter basis, ranging from 41-44%, compared to the national average of about 36%.
Purchase loans told an even more interesting—and probably positive—story for North Carolina, however. Nationally, purchase loans in Q2 grew at an 8% clip compared to the first quarter, but North Carolina purchase activity was much stronger. Durham (19%), Jacksonville (21%), Raleigh (16%) and Winston-Salem (27%) all had more than double the national increase in purchase loans.
And all of those metro areas had less of a decrease compared to 2021 than the national rate of decline, which was 21.5%. That suggests a more resilient market in North Carolina than in other parts of the country; one that’s less likely to see as dramatic a drop in home sales as other markets, or at least one that will be a more gradual decline.
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Editor’s Note: WRAL TechWire reporter Jason Parker, the author of the report and a licensed real estate agent in North Carolina, works with journalists from WRAL.com to track and present market data and report on how people are experiencing the region’s changing real estate markets. These special reports will use the category tag “Triangle Real Estate” or “Triangle Real Estate Market.” This column is a part of WRAL TechWire’s reporting on the latest with our Triangle real estate markets.
