Mortgage lending in the U.S. has plummeted to levels not witnessed in close to 17 years.
The first quarter of 2014 saw $226 billion in loan volumes, according to data from the Mortgage Bankers Association. The figure has not been that low since 1997, and is one-third of the average amount in 2006. All-cash purchases have soared to more than 40 percent, thus lifting housing prices and reducing lending.
Thirty-four percent of Wells Fargo’s originations in the first quarter went to the refinancing of customer loans, a drop from 69 percent year-over-year.
“Banks large and small are going to have to adapt to a new reality because mortgage origination volumes going forward aren’t going to support the big businesses they’ve had in place for the last few years,” economist Stephen Stanley of Connecticut-based Pierpont Securities LLC. “They’re going to have smaller, leaner operations, and we’re seeing them make that shift.” [Bloomberg News] — Mark Maurer