After a few months with big concerns about a slowdown or stagnant growth in new home interest, the country’s biggest lenders present a positive outlook. Both shared financial reports in recent weeks that indicate that growth of new home loans is happening already.
One of those companies, Wells Fargo, shared data that originations in their second quarter reached $62 billion, which is an increase of more than 30 percent from the year prior. J.P. Morgan Chase also reported a spike, with their originations increasing over 70 percent from the year before.
While the news is certainly good overall for those in the lending market, who have been trying to increase home sales and originations in recent months, there are some geographic areas that seem to be hot spots as well. These include Southern Florida, Denver, New York, and California. One of the reasons for the increase is believed to be more affordable housing, which helped potential buyers to initiate their applications for mortgages.
Even though prices and rates have moved slightly, they are still affordable for a whole range of buyers. Combine this with a jobs market that seems to slowly be getting back on track and that’s good news for mortgage lenders. The market for home sales was quite hot in the late spring and summer, which is another reason behind the jump in loan originations.
On a broader scale, mortgage loan applications also came very close to their highest level in the last two years. Experts in the industry believe that the reason for this is quick growth in lending and the fact that mortgages are increasing from their post-recession lows. A better economy has signaled to buyers who might have been hesitant before that it could be time to initiate a new loan application.
Perhaps the best news of all of this is that people are interested in buying a home. The interest has been there but economic indicators have not matched it. With continued improvements across the economy, it is possible that lenders will continue to see spikes during the typical expected seasons but also a slower and more stable growth.
Lenders do need to take a deep dive into why it is still so difficult for many families to get a home loan, even though more people are trying in recent months. While interest and applications are growing, the access is still lower than expected. This is a big barrier to long-term growth in originations for mortgage lenders. The government has already recognized this problem and has taken necessary steps to decrease mortgage costs and expand the pool of possible buyers. Going forward, this is the area with the most potential to open up new lending applications, but it could also be a major barrier to growth if lenders do not understand how it impacts their business.