Texas residential mortgage activity reflecting slowdown in home sales

COLLEGE STATION – Residential mortgage lending activity for September 2024 was generally unchanged from the previous month, with major volume categories roughly tracking their recent trends, according to the latest Texas Residential Mortgage Survey (TRMS.)

Home purchase originations have trended lower since March and were below the long-run average in September, reflecting the slowdown in home sales. Except for a summer dip, first-lien cash out volume has been steady throughout 2024. Rate and term refinancing volume was down slightly but continued an upward trend that started in fall 2023.

The average value of home purchase originations has been on an erratically decreasing trend, which may reflect some of the softening in home prices in some markets. The refinancing value trend has been somewhat more positive recently, though September’s value did pull back. After considerable improvements in banker optimism from 2023, the pattern has been flat this year. This matches a small decrease in overall business activity and unchanged hours worked.

Federal Reserve monetary policy changed in September, but the impact on survey results was likely muted because of mixed signals across the economy.

“While the Federal Reserve delivered an aggressive and long-anticipated 50 bps rate cut in September, the bond markets had fully priced the cut in and lost ground on positive data in the days after the announcement,” said Texas Mortgage Bankers Association (TMBA) Vice President Erin Dee. “The market has trended toward slightly higher rates in the last several weeks, putting a damper on the pickup in refinance activity we had only recently started to note. While positive movement in the MBS market prior to the Fed’s announcement helped increase originations and revenue, the subsequent reversal has led to a general decline in industry sentiment.”

Coming off the usually busy homebuying season, the tepid September may not be surprising.

“Most existing mortgage holders enjoy lower rates than they would find if they refinanced today,” said Daniel Oney, Ph.D., research director at the Texas Real Estate Research Center at Texas A&M University (TRERC). “We are also hearing from real estate professionals around the state that households are anxious about non-economic risks.”

“Many people were hoping for a mini refi boom, only to be let down yet again by data that are showing the job market continues to be stronger than expected,” said Dee. “The damaging impacts of Hurricane Helene, a hot war in the Middle East, and a wild election season leave plenty of room for rate volatility heading into the fourth quarter.”

The TRMS is a collaborative effort between the TMBA and TRERC to provide analysis of conditions and changes in the residential mortgage industry. It is designed as a monthly sentiment survey to gauge current conditions and expectations in and around the Texas residential mortgage industry. All TMBA members are invited to participate.