The U.S. mortgage market, as told by 3 charts

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The bad news for loan officers: The mortgage market is still passing through one of its biggest slumps in recent memory.

The good news for loan officers: This mortgage recession, in terms of volume, is likely passing through the trough/bottom.

The story is pretty simple. After spiking in 2022, mortgage rates still haven’t come down in a meaningful way.

That has constrained turnover in the existing home market, as the “switching costs” of going from a 3% mortgage rate to a 6% or 7% rate don't make a lot of financial sense for would-be sellers. Additionally, traditional refinancing has essentially dried up.

According to the latest reading this week from the Mortgage Bankers Association, both mortgage purchase applications (see above) and refinance applications (see below) have bounced up a little from their lows reached in 2023.

However, just barely.

Mortgage applications are still hovering around multi-decade lows.

Suppressed mortgage activity means that there are still waves of layoffs and mergers occurring across the mortgage industry. [Here’s a mortgage layoff/merger tracker].

We're only 15 days into February and already...

• Guild Mortgage acquired Academy Mortgage (2/13/24)

• Proprietary Capital acquired American Financial Resources (2/12/24)

• 1st Priority Mortgage acquired Hudson United Mortgage (2/6/24)

• Fairway Independent Mortgage Corp. shuttered its wholesale lending division (2/2/24)

• Newrez layoffs (2/2/24)

• New American Funding (NAF) acquires Draper and Kramer Mortgage Corp. (DKMC) (2/1/24)

When ResiClub says “mortgage market” we aren’t talking about the entire housing sector.

After all, considering everything, the homebuilding sector has been fairly resilient through the mortgage rate shock. Builders reduced their margins to deploy incentives/affordability adjustments, while existing inventory (builders’ competition) remained tight. And so builders were able to keep selling.

Big picture: The primary way the mortgage industry could rebound in the short term is if mortgage rates were to see a steep decline. An improved level of housing affordability would not only spur more activity in the existing home market but also unleash some pent-up demand in the refinance segment.

Nothing in this newsletter is investment advice. Please do your own research.

Any mention of an investment opportunity shouldn’t be considered an endorsement, nor should you ever interest money without doing your own diligence.

2 ResiClub PRO articles from the weekend:

• 11 studies, 1 conclusion: The U.S. housing market is underbuilt

• Charting the changes in apartment vs. single-family rents across top U.S. metros