Residential mortgage activity cools off

After a flurry of activity spurred by record-low interest rates, residential mortgage activity has cooled off as interest rates and inflation have climbed. 

“Refinances, which are a large part of this business, have been done away with completely,” said Michael Lopez, owner and president of Alpha Mortgage. “They’re just gone. Rates rose from the mid-twos to the low-fives.”

As of June 10, the average 30-year fixed residential mortgage rate is 5.62%, according to Forbes. Following an all-time low in December 2020, rates are now approaching a 13-year high, however, Lopez takes a more zoomed out approach when considering the fluctuations. When he first entered the industry in 1993, he said he was doing a ton of business with 18% fixed and 12.9% adjustable rates. “We are in great territory,” he said, with rates that are “still some of the lowest in history.” 

“People have forgotten. They think 5% is a higher rate,” he said. “I just have a longer-term memory than that.”

In the Wilmington MSA, residential mortgage originations were down 26% year-over-year as of the first quarter, when 3,394 were initiated, according to data collected and analyzed by ATTOM. Mortgage originations peaked in the third quarter of 2005 at 5,839. 

Residential refinance activity was nearly halved year-over-year, down about 47% to 1,458 originations in the first quarter in the Wilmington MSA. Though most indicators are trending downward, one measure, home-equity lending, was up 16% year-over-year, with 506 originations. 

Wilmington’s activity mirrors nationwide trends, whereby tight supply and soaring inflation are limiting purchases. Trends are indicating “the nation’s decade-long housing market boom may be cooling off, including slower price growth, smaller home-seller profits and declining home affordability,” ATTOM shared in a release. 

Lopez, with a staff of 145, said he hasn’t had any layoffs as a result of reduced activity – he’s actually hiring. 

Lending firms are reducing their workforces this month in the Charlotte area, per recent state layoff notices. Many national lenders are shedding their payrolls to confront the reduction in revenue and activity. 

For Lopez, though refinance activity has plummeted, purchases are still flowing, he said. “We're a relationship lender so we're a little different than most of our competition,” he said.

National “call center” lenders are struggling, Lopez said, because they relied on leads that are now drying up, whereas a firm like Alpha Mortgage can depend on repeat customers. “We tend to be preferred lenders for builders and Realtors."

He said, “If your model was based upon call center refinances, you suddenly woke up one day and you had no business. It's been a very aggressive market, but now it seems to be evening out.”