Insights by Insights: Are you prepared for summer?

The story of the residential mortgage industry for the first half of 2020 has been the record refinance market, even with the impacts of Covid-19. The data certainly supports that narrative, but digging deeper, we’re seeing a surprise from the purchase market. In this inaugural Insights by Insights blog, where Ellie Mae Insights™ will give us a look at the industry in near real-time, we’ll unpack the current trend in the purchase market.


Loan applications as the leading indicator

As we look at loan applications below, we saw month over month (May over April 2020) purchase loan applications increase nearly 26%. Looking at seasonality for 2017, 2018, and 2019, we saw month over month (April to May) purchase loan applications increase of ~17%, 7.8%, and 3.6% respectively. The significant jump in May likely reflects the pent-up (and normal seasonal) demand that was held back by shelter in place in March and April.

In the right bar below, we see overall borrower characteristics shifting with average credit score increasing by more than 20 points, DTI and LTV dipping by close to 5%. The average borrower age is at about 45 years (a dip of 2 years in monthly average) and the average purchase interest rate is at its lowest level since the start of this analysis in January 2017.

Insights_by_Insights_1.JPG

In the chart below, we overlaid purchase loan volume along with refinance loan volume from January 2017 to May 2020 to take seasonality into account. Again, the data shows the historic refinance story in 2020, but what has not been talked about is the purchase loan volume – it too represents historical levels. In fact, looking at the trend lines, we see refinance volumes decreasing into the summer while purchase loans are increasing into the summer.

Insights_by_Insights_2.JPG

The stacked bar chart of purchase and refinance loan applications below illustrates historic volumes. The combined (purchase + refinance) loan application volume for March, April, and May 2020 is higher than any month in 2019.

Insights_by_Insights_3.JPG


Loan applications across the US

From April to May 2020, purchase volume increased across the nation except for Alabama, which saw a minor decline of 1.5%. As you can see in the map below, indicated by the darker blue color, a few East Coast states saw the largest increase in purchase loans. Across the United States, average credit score increased by 5 points, DTI dipped by about 1% and no significant change was observed in LTV, interest rate or borrower age.

Who are these purchase loan applications coming from? You can see from the box highlighted below that nearly 60% are first time homebuyers. Ellie Mae Insights has the ability to dig into more demographics data about these first-time home buyers, but we will save that for another day.

Insights_by_Insights_4.JPG


Loan applications by select counties

Below are some select top-performing counties across the nation by loan application and how they fared month over month (April to May 2020). 

1. Riverside County, CA – Riverside County saw an increase of just over 4% in overall loan applications, but purchase increased by over 26% and refinance dipped by about 2%. The borrower profile didn’t change much, but DTI was more than 3% higher than the national average.

Riverside_Map.JPG

2. Santa Clara County, CA – Santa Clara County saw an increase of nearly 32% with purchase increasing by over 43% and refinance by 30%. The borrower profile saw marginal improvement, but overall borrower profile was significantly better than the national average – with 91% of the loan applications being refinance applications.

Santa_Clara_Map.JPG

3. Miami Dade County, FL – Miami Dade County saw an increase of more than 14% with purchase driving the majority of loan applications by more than 56% and refinance dipping marginally by around 2%. Average credit score was 17 points lower than the national average with average interest rate higher than the national average by 20 bps.

Miami_Map.JPG

4. Wake County, NC – Wake County saw a 17% increase in loan applications with purchase rising by over 25% and refinance by 113%. The average credit score was 15 points higher than the national average.

Wake_Map.JPG


Summer is here – are you prepared?

Looking at the trends,  purchase loans are picking up across the country.

As June data comes in, we will continue to look for any interesting trends to report. What else would you like to see in future Insights by Insights posts? Let us know by leaving a comment or email us at insights@elliemae.com. We are just scratching the surface of Ellie Mae Insights, but if you want to learn more about Ellie Mae Insights’ broad range of capabilities, check out the link here.


Want more resources to help you harness the power of data?

Sign up for the D3: Data-Driven Decisions Community to join fellow data-loving lenders who receive industry insights, expert advice and best practices for using data to optimize their workflow, better understand consumers, and close more loans.

Join the D3: Data-Driven Decisions Community

Related posts