The real estate market is showing signs of life with the news that home loan applications are up by a massive 23 percent in the last quarter, coming on the legs of the FHA's decision to reduce premiums last January to encourage more buying activity.
Housing data firm RealtyTrac revealed the news in its new Q2 2015 U.S. Residential Loan Origination Report, which shows a total of 1,950,267 loans were originated on in the last quarter, up by 22 percent from the first quarter.
The total dollar volume of loans originated in the second quarter was nearly $540 billion, up 14 percent from the previous quarter and up 29 percent from a year ago. Refinance originations represented nearly $307 billion in the second quarter, 56.7 percent of total loan origination dollar volume, and purchase loan originations represented nearly $234 billion, 43.3 percent of total origination dollar volume. As a share of total loan origination dollar volume, purchase originations reached a recent peak of 51.3 percent in the third quarter of 2014.
Of the more than 1.9 million loan originations in the second quarter, 737,824 were purchase loan originations, up 9 percent from a year ago. There were 1,212,443 refinance originations in the second quarter, an increase of 9 percent from the previous quarter and up 32 percent from a year ago.
According to Darren Blomquist, Vice President of RealtyTrac, the main reason for the growth in home loan originations was the FHA's decision to reduce premiums earlier this year.
“The rise in loan originations particularly the sharp rise in FHA purchase originations indicates the FHA premium reduction at the end of January really is having a big impact, pushing people off the fence to purchase,” Blomquist said. “The average loan amount for FHA purchase loans increased from $187,718 in the first quarter of 2011 to $197,315 in the second quarter of 2015 (a 16 quarter high), as the lower FHA premium gave those buyers more buying power.”
RealtyTrac's report broke down the number of loan originations by type, saying that conventional and jumbo loans numbered 1,203,722, accounting for 61.7 percent of all loan originations. Meanwhile, Federal Housing Administration (FHA) loan originations accounted for 16.7 percent of all loan originations in the second quarter, up from a 13.6 percent share in the previous quarter. Veterans Administration (VA) loans totalled 118,807, representing 6.1 percent of all loan originations. Finally, there were 118,807 Home Equity Lines of Credit (HELOC) originated in Q2, representing 14.4 percent of all loans in the quarter.