Insights by Insights: Fall brings changing colors and mortgage trends

Ellie Mae Insights' October 2020 data shows that loan applications continue to trend down, following the typical Fall seasonality, but volumes remain historically high. At the same time, closed loans remain strong as the loan applications’ backlog from previous months is being processed. 

If you are an Insights customer, we have embedded links below to each Insights chart so you can follow along and map your own data against what we are seeing for the industry.

Loan applications as the leading indicator

Overall loan applications for October are down 9.3% from September, compared to an approximate 10% decrease from August to September. Looking at seasonality for the October over September period in 2019, 2018, and 2017, loan applications were up 5.2%, up 14%, and up 7.5% respectively. 

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View chart in Ellie Mae Insights.

The bar chart below provides context to the October over September decline. We can see the October 2020 loan application volume (>63% increase in overall volume compared to October 2019) is still near highs for the three-year plus period we are showing. 

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October over September 2020 purchase applications dipped 9.9% following a slide of 7.1% September over August. Taking seasonality into account for the October over September period in 2019, 2018, and 2017, purchase applications were up 6.3%, up 12.6%, and up 9.5% respectively. Make no mistake, people are still buying homes in October at a higher volume than any month in the last three calendar years.

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View chart in Ellie Mae Insights.

October over September 2020 refinance loan applications dipped 8.9% compared to September over August’s decrease of 11.7%. Seasonally in 2019, 2018, and 2017 for October over September, refinance loan applications were up 4.4%, up 16.2%, and up 5.6% respectively.

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View chart in Ellie Mae Insights.

Geographically for October over September, all states in the US showed decreasing loan applications. The most recent borrower profile (right hand side) remains strong, with a slight drop in credit score, a decrease to DTI and a slight decrease to LTV. Interest rates increased 1bps, while the average customer age held steady at 46 years of age.

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View chart in Ellie Mae Insights.

Furthermore, viewing by MSAs, we see clearly many areas (see blue areas in the below chart) across multiple states in the US had increases in loan application volume. 

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View chart in Ellie Mae Insights.

And if we look at purchase loan applications (by county) since May, could some of these areas be the talked about “Urban flight” landing spots?

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View chart in Ellie Mae Insights.

Closed loans are extremely healthy

Overall closed loans are still working off historical loan application volumes. October over September closed loans increased 7.1%. Seasonally, October over September for 2019, 2018, 2017 were up 4.8%, up 9.9%, up 5.6% respectively.

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View chart in Ellie Mae Insights.

The below bar chart provides context to the October over September increase in overall closed loans. We can see the October 2020 closed loan volume (>80% increase in overall volume compared to October 2019) is at an all-time high for the three-year plus period we are showing. With industry time to close over 50 days, we expect closed loan volumes will remain historically higher well into 2021.

Chart9.pngOctober over September purchase closed loan volume increased 3%. Seasonally, October over September for 2019, 2018, 2017 were up 2.3%, up 7.3%, up 1.1% respectively.

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View chart in Ellie Mae Insights.

October over September refinance closed loan volume increased 10%. Seasonally, October over September for 2019, 2018, 2017 were up 7.4%, up 17.3%, up 13.9% respectively.

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View chart in Ellie Mae Insights.

What goes up, must come…

What an incredible run we have had in loan applications this year, but all good things must come to an end, right? We see loan application volumes sustaining huge close loan volumes going well into 2021. However, we said this last month and we will reemphasize, now is the time for lenders to do two things:

  1. Use Insights to explore specific MSAs and counties that have loan application growth
  2. Build your Data & Analytics capabilities for the next cycle so you don’t get left behind

What data would you like to see in future Insights by Insights blogs? Let us know by leaving a comment or email us at insights@elliemae.com. We had a blast during this month’s Insightful Coffee Break. Mark your calendar for December 8 and click here to sign up for next month's Insightful Coffee Break where we will provide more insights and further our conversation about Data & Analytics. See you then!

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