Mortgage Bankers Association (MBA) Report

Lending

Kan Headshot (2)

Joel Kan
Associate Vice President, Industry Surveys and Forecasting Mortgage Bankers Association

 

The Arizona residential market continues to grow year over year, albeit at a slower pace and in a different fashion than the country as a whole. Between April 2016 and April 2015, applications for a mortgage to purchase a home increased 6.9 percent, compared to 16.9 percent nationally. Applications for a mortgage to refinance a home increased 6.9 percent as opposed to 7.4 percent nationally. The average loan amount grew in Arizona as well from $213,694 in April 2015 to $220,686 in April 2016.

Nationally, loan sizes of $300,000 and higher continue to grow at a faster pace. While the lower loan size buckets still lag, growth rates are showing a significant improvement compared to the past two years – an important indicator that first time buyers may be returning to the market in greater numbers.

In March 2014 and March 2015, applications for purchase loans of $150,000 and less were contracting compared to previous years. Two–thirds of all purchase applications are less than $300,000 – these applications are typically loans generated from entry level and first time home buyers. Due to various factors including tight inventories of lower priced homes, access to credit, below normal rates of household formation and the increased propensity to rent – this segment of the market has been slow to recover.
MBA is expecting $1.6 trillion in total mortgage originations in 2016 nationally with approximately $970 billion coming from purchase and $585 billion from refinances. Purchase originations are expected to increase in 2017 and 2018 as continued economic growth and a strong job market supports household formation.

Household formation in turn is likely to boost housing demand along with rising rents that may push some renters to purchase homes.

Refinance originations will continue to decline as loan rates eventually rise. This factor will cause the overall industry of originations to show a decrease in 2017 and 2018.

Loans held by Arizona borrowers showed continued performance improvement in the first quarter of 2016. The delinquency rate for mortgage loans on residential properties in Arizona was 3.18 percent at the end of the first quarter, a decrease of 58 basis points from the previous quarter. The delinquency rate excludes loans in the process of foreclosure. The percentage of loans in Arizona on which foreclosure was started during the quarter increased slightly, rising 3 basis points to 0.26 percent. Despite the increase in new foreclosures, the starts rate was still below the long run average of 0.54 percent for Arizona. The percentage of loans in the foreclosure process at the end of the quarter fell 4 basis points to 0.63 percent, well below the peak of over 6 percent in 2009.

The serious delinquency rate, which includes all loans in the foreclosure process and loans that are ninety days or more past due, dropped to 1.56 percent from 1.68 percent in the previous quarter. Arizona continues to perform significantly better than the United States average, whose first quarter 2016 serious delinquency rate was 3.29 percent, and foreclosure starts rate was 0.35 percent.

For more information on the Monthly Profile of State and National Mortgage Activity, National Delinquency Survey, MBA’s Chart of the Week or Mortgage Finance Forecasts, please visit http://www.mba.org.

 

Joel Kan is responsible for managing the production of Mortgage Banker Association’s macroeconomic and housing market forecasts. He also oversees the production of MBA’s industry surveys and four of the association’s most high profile reports.