Insights by Insights: The summer market is a scorcher!
To say that the start to 2020 has been unusual is the understatement of the decade. We have had a record refinance market driven by historically low interest rates and high unemployment driven by a global pandemic. The June 2020 data shows the market is continuing its upward trend for both loan applications and closed loans. If you are an Ellie Mae Insights™ customer, we have embedded links below to each Insights chart so you can follow along and map your own data against what we are seeing for the industry.
Loan applications as the leading indicator
Overall, there was an increase of 18% in loan applications month over month (June over May). Refinance applications represented 62% of the volume, while purchase applications represented 38% of the volume over the last two months.
We saw month over month (June over May) purchase loan applications continue the trend from last month with an increase of over 26%. Looking at seasonality for 2017, 2018, and 2019, we saw month over month (June over May) purchase loan applications decrease of 3.7%, 9.5%, and 9.7% respectively. As you can see from the last three years’ data, the summer of 2020 is not only atypical, but also quite remarkable. Perhaps this purchase market stems from the flight of new home buyers moving to the suburbs due to COVID-19.
The stacked bar chart of purchase and refinance loan applications below illustrates historic volumes. Looking at seasonality in across 2017, 2018, and 2019, you can see how the first half of 2020 is truly remarkable even if you were to take out March.
And the strength of the market is coming from all states in the United States.
Drilling into the state of California, we can see on the right-hand side the strength of the borrower profile over the rest of the U.S. in aggregate (above chart, right hand side).
Closed loans tell the real-time story
Overall closed loans increased by 17% June over May. So far this year, it has been a steep ascent and one has to wonder if we are near the peak or is there more climbing ahead?
Closed loans for purchases rose by 34% (see chart below), while refinance closed loans rose less than 9% during this same period (June over May).
The stacked bar chart below gives us a fuller picture taking seasonality into account. Starting in September of last year, you can see that refinances started to pick up and began to eclipse purchase closed loans as a percentage of the monthly total. Over the last two months, the mix has slowly started to shift back to purchases. It will be interesting to see the data in the coming months. The mix notwithstanding, June 2020 purchase closed loans are still higher in volume than in any other month since January 2017.
Finally, despite the country being in COVID-19 lockdown and many people are working from home, we see strong growth across the country with the exception of North Dakota showing a 0.13% drop month over month. Borrower profile (Credit Score, DTI, LTV, Borrower Age) sees minor changes month over month.
It’s a red-hot market
We continue to see that purchase applications and purchase closed loans are picking up across the country. It will be interesting to see how the market transitions into the fall. Will we see a drop in volume as seasonality kicks in or will the market continue its climb in both loan applications and closed loans?
As July data comes in, we will monitor and look for any interesting trends to report. What else would you like to see in future Insights by Insights blogs? Let us know by leaving a comment or email us at firstname.lastname@example.org. We are just scratching the surface of Ellie Mae Insights, click here if you would like to learn more about its broad range of capabilities.