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A look at residential loans in 2016

Posted on Monday, May 16, 2016 at 3:33:04 PM

The residential real estate market has long been a critical indicator of economic health in the United States. In the years following the recession, home values, starts and sales have all been on a relatively consistent, positive trajectory. Although there have been some hiccups along the way, the overall economy has also made a tremendous amount of progress in the past few years, and this bodes well both for individuals who own homes and for those who are looking to purchase in the near future. 

Residential financing has also improved exponentially, with rates remaining steady and lenders becoming increasingly competitive in the rates offered to applicants. The first quarter of 2016 is now in the books, and a new report has pointed toward some of the trends that took shape during those three months. 

Cold start to 2016
The latest data released by RealtyTrac indicated that loan originations for residential financing purposes decreased by 8 percent in the first quarter of this year compared to that of 2015. Unfortunately, the bad news did not end there, as the drop was more significant when compared to the final quarter of 2015, and the figure reached the lowest volume in the past two years. However, home equity lines were up, and there were other positive findings in the report as well. 

"After a surprisingly strong 2015, the mortgage refi[nance] market started running out of steam in the first quarter of 2016 despite lower mortgage interest rates," RealtyTrac Senior Vice President Daren Blomquist explained. "Meanwhile the purchase loan market continued the pattern of slow-and-steady growth that it has been following the past two years, and HELOC originations increased on a year-over-year basis for the 16 consecutive quarter, showing that borrowers are regaining both home value and the confidence needed to increasingly leverage their home equity."

With respect to Blomquist's comment on the refinancing market, RealtyTrac found that originations in this category dropped by 20 percent year-over-year in the first three months of 2016. 

The road ahead
Homeowners should not begin to worry quite yet, as there are virtually no signs that rates being offered to potential buyers are going to go up significantly any time soon. On the flip side, individuals looking to acquire a loan to purchase a home should consider working with a local, community bank to get the best financing option available.