Despite a burst in refinancing and lending when rates edged downward, the mortgage market succumbed to the typical fall lulls.
Residential lending approvals were up 14% year over year in the fourth quarter, according to a new report ATTOM released Thursday, but total mortgage loans saw a quarterly decline of 3%. "Despite the annual gain in lending activity, the total number of home mortgages issued during the fourth quarter of last year remained down by nearly two-thirds from a high point hit in 2021," ATTOM reported.
In the fourth quarter of 2024, mortgage rates slipped into the low 6's in September, triggering a spate of homebuying before climbing and flirting with the high 6's in November. The dearth of homes for sale didn't help either: "Supplies of residential properties for sale remained near five-year lows," ATTOM reported.
Major cities in the South and Midwest saw the biggest quarterly declines. For metropolitan areas with populations of at least 1 million, St. Louis had the largest quarterly decrease in total lending: 31%. Atlanta, down 18.9%; Virginia Beach, Virginia, down 15.9%; and Tampa, down 13%, represented the southern contingent in the negative column, while Rochester, New York, saw a 16.5% decline.
The biggest increases in total lending for the largest regions were out West and beyond: San Jose, California, up 78.1%; Honolulu, up 75%; Los Angeles, up 43%, San Francisco, up 40.7%, and San Diego, up 40.1%.
The mid-Atlantic division recorded the strongest appreciation, posting a 7.1 percent increase from the fourth quarter of 2023 to the fourth quarter of 2024. The West South Central division recorded the smallest four-quarter appreciation, at 2.3 percent.
Lenders issuing mortgages backed by the Federal Housing Administration made up 14.9% of all residential property loans in the fourth quarter. Residential loans backed by the U.S. Department of Veterans Affairs took up 6.5% of the total loans.
The Federal Housing Finance Agency apparently expects the demand for loans to continue. It announced the loan limit values for mortgages acquired by Fannie Mae and Freddie Mac for single-family properties to increase on average by $39,950, or 5.2%, this year. Home prices rose 4.5% year over year in the fourth quarter of 2024 and 1.4% quarterly, according to the FHFA's House Price Index, indicating the need for this higher lending threshold.
House prices rose in 49 states between the fourth quarter of 2023 and the fourth quarter of 2024, the FHFA reported Tuesday. The five states with the highest annual appreciation were Connecticut, 8.3 percent; New Jersey, 8.3 percent; Wyoming, 8.3 percent; Vermont, 8.1 percent; and Rhode Island, 7.6 percent.
Prices rose in 92 of the 100 largest metropolitan areas over the previous four quarters, according to the report. The annual price increase was the greatest in urban Honolulu, at 18.7 percent. The metropolitan area that experienced the most significant price decline was Cape Coral-Fort Myers, Florida, at 6.3 percent.
“U.S. house prices grew at a slightly higher rate in the fourth quarter after three straight previous quarters of weaker appreciation,” Anju Vajja, deputy director for FHFA’s Division of Research and Statistics, said in a statement Tuesday. “The price growth accelerated during the quarter as the inventory of homes for sale tightened even further.”
Refinance market showed signs of life
Total mortgage loans dipped last quarter, but refinance packages increased for the third consecutive quarter.
Americans refinanced 641,918 home loans during the fourth quarter, up from 603,324 during the third quarter, according to the ATTOM report. Hilton Head, South Carolina; Wilmington, North Carolina; San Jose, California; Buffalo, New York; and San Francisco led the nation in highest refinance activity. Smaller cities within the Denver and Houston metropolitan area also saw noteworthy increases.
The ATTOM data dovetails with what the Mortgage Bankers Association has seen: Refinances grew to 38.9% of all mortgage applications last week.
“Although overall refinance application activity remained fairly weak, FHA refinance applications saw an 8 percent increase over the week," Joel Kan, deputy chief economist at the Mortgage Bankers Association, said Wednesday in a statement. "Compared to last year, overall refinance applications were up 45 percent."
Much like with auto loans, refinancing is when homeowners replace their mortgage with a new one that has different terms. Homeowners can refinance with their same lender or change financial institutions altogether. In most cases, they try to get an interest rate that's at least 1% lower than what they have. Snagging a lower interest rate often comes with a lower monthly payment, but it also means paying closing costs again.
The market slowing for all loans is not atypical for the annual home-buying slump that occurs during the fall season, but the refinancing spike shocked ATTOM CEO Rob Barber given the higher interest rates.
Thousands of Americans may have refinanced their mortgages during the final quarter of 2024 because "rates started the quarter at one of the more attractive points over the past few years," Barber said Thursday in a statement. The refinancing suggests "that homeowners were trying to get their mortgages reset before borrowing costs went back up."
The lending will remain slow for a bit, but things could turn around in the spring if mortgage continue to drop, he said.
Refinance activity soared during the pandemic as interest rates nearly flatlined at 3%. Rates roared back quickly after the nation climbed out of the pandemic, capping at 7.7% in October 2023. So far in 2025, rates have peaked at 7.01%.
The increased refinancing activity comes even though rates have not dropped dramatically, a sign that borrowers are looking for any chance to lower their monthly payment.
Mortgage rates — combined with rising home prices — have been the main two culprits in why middle-class Americans have said homeownership is increasingly growing out of reach. Depending on the length of the loan, rising mortgage rates can add hundreds of dollars to a monthly payment.
The average 30-year, fixed-rate mortgage fell to 6.76% Thursday on a weekly basis, according to mortgage giant Freddie Mac. It was the sixth consecutive week of lower rates and the lowest average since December.