So many Californians refinanced their homes as interest rates dropped in the past few years that the refinancing business is starting to dry up.
So says TRW Redi Property Data, which keeps track of mortgages. More than a quarter of a million Californians refinanced their homes during the first three months of the year--including 25,000 in Orange County. But that was down by a third across the state from the last quarter of 1992.
"There's less and less refinancing going on out there," said Nima Mattagh, a TRW market analyst. "There's certainly a lot less business than the lenders have seen in the last two years."
And refinancing isn't likely to pick up during the rest of the year, TRW said. Consider these figures:
* A year ago, 82% of all home loans in the state were refinancings. This quarter the portion was 78%.
* In 1992 and the first three months of this year, 1.6 million California homeowners refinanced their homes. That's a third of all the homeowners in the state.
* In Orange County, 164,000 homeowners refinanced during that time--also about a third of the county's half a million homeowners.
In other words, the pool of people likely to refinance is shrinking quickly.
The lowest interest rates in two decades set off a refinancing boom two years ago that kept banks, thrifts and mortgage brokers busy--even in a rotten real estate market. Because home sales plummeted in the recession, lenders weren't making many new loans. But the demand to refinance--at lower rates--homes that people already owned became overwhelming.
Meanwhile, a mortgage bank from Pasadena used the boom to muscle the banks and thrifts out of the way and become the biggest mortgage lender in the nation in just a few years. Countrywide Credit Industries Inc.--better known to borrowers as Countrywide Home Mortgage Loan--is the largest mortgage lender in California, too, according to a TRW market survey. It made 6,700 loans totaling $1.1 billion during the first quarter this year. That's a healthy 3.5% share of the California market.
In Orange County, Countrywide wasn't quite as dominant: It grabbed 2% of the market, good enough to land it in fifth place. (Bank of America came in first, with a 2.9% market share.)
Now that the refinancing boom is cooling off, though, "clearly mortgage lenders have to start strategizing for the future," said Tim Whetsell, a partner in the Newport Beach office of real estate consultant Kenneth Leventhal & Co.
If the housing market revives, of course, the lenders could merely shift to making more mortgage loans to home buyers.
What's the likelihood of the market perking up anytime soon? Not good, according to the TRW figures: The market is still sliding. Housing sales, for instance, dropped 10.5% in Southern California in the first four months of this year.
In Orange County, the situation was worse: a 12.4% drop through April. Last year, 9,300 homes sold in the first four months; this year the total was 1,000 fewer.
So home prices, not surprisingly, are soft: They dropped an average 4% in Southern California compared to a year earlier. The percentage was the same for Orange County. (A home now costs an average $241,000 here, down from $252,000 a year ago.)