Texas residential mortgage industry welcomes continued improvement in origination volume, values

COLLEGE STATION – Despite elevated interest rates, subtle signs of momentum are appearing across Texas’ residential mortgage industry, according to the latest Texas Residential Mortgage Survey (TRMS). The business activity index increased throughout the first quarter and reached its highest level since the survey began in September 2022.

The home-purchase market drove an uptick in activity, and refinance originations stabilized in terms of volume and average value after a year-long slide.

“While robustness in the labor market has delayed the Federal Reserve’s cuts to the federal funds rate, healthy household balance sheets and stable employment prospects are supporting some recovery in the housing market,” said Wes Miller, senior research associate at the Texas Real Estate Research Center (TRERC). “There’s been a steady increase in the number of pre-approved customers looking for homes, and mortgage application approval rates increased for the second straight month.”

TRMS respondents expect these trends to continue through the summer and to gain traction if interest rates decrease.

“Some of the recent improvements may be attributed to normal patterns that typically occur at the start of the spring buying season, but the response seems stronger than in March 2022,” said Miller.

Revenue from closing costs and margins for the first quarter corroborate a shift toward more activity.

The TRMS indicates an improved outlook and decreased uncertainty through at least the third quarter, and respondents expect mortgage-interest rates to fall and stimulate industry activity.

“Perhaps consumers have adjusted to the higher rate environment, or perhaps buyers and sellers can no longer sit on the sidelines and wait for rates to change,” said LoanPeople LLC Chief Operating Officer Erin Dee. “We are optimistic for the coming months based on the survey responses.”

In light of the improvements reflected by the TRMS, some in the mortgage industry note potential longer-term structural headwinds.

“There are some concerns in the industry about increased regulatory burdens following a Consumer Financial Protection Bureau press release that discussed a new focus on ‘junk fees’ in lending, as well as lawsuits involving the National Association of Realtors and Loan Officer Compensation that may alter our landscape in the coming years and months,” said Dee.

“Despite these concerns and persistently strong economic data that ensure rates will stay ‘higher for longer,’ lenders are seeing improvements in business activity. After nearly two years of downbeat sentiment from mortgage lenders, it appears that the tide is beginning to change.”

The TRMS is a collaborative effort between the Texas Mortgage Bankers Association (TMBA) and TRERC to provide analysis of conditions and changes in the residential mortgage industry. 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.