Once Hectic Mortgage-Refinancing Pace Slows to Crawl : Real estate: Higher interest rates drop activity to a five-year low in Orange County. Lenders push new-home loans.
Recent increases in mortgage rates have pushed home refinancing activity in California to its slowest pace in more than five years, with Orange County showing an 87.1% decline in October from a year ago, according to a report released Friday.
A total of 1,685 homes were refinanced here in October, compared to 13,084 homes refinanced in October, 1993, according to Dataquick Information Systems in La Jolla. Statewide, 19,968 homes were refinanced last month, compared to 124,232 during the same month last year, a drop of 83.9%, the company found.
Rising interest rates this year have caused the refinancing market to all but collapse. Rates for a 30-year, fixed-rate home loan averaged nearly 9% last month, a significant increase from the 6.7% average for October, 1993.
“The decline was expected, but it still hit the lending industry hard,” said Donald L. Cohn, Dataquick’s chief executive officer. “Most lending institutions have been trying to make up for some of the decline by increasing loan activity in other categories, especially loans to home buyers.”
Historically, about 30% of all home loans made by lenders nationwide have been refinances. A year ago about 69.8% of such loans were refinancings, but by October that had dropped to about 26.6%.
With a consolidation underway in the mortgage lending industry, institutions are attempting to cope by increasing loan activity in other areas, targeting new-home buyers in particular.
“We’ve been through that ‘re-fi’ mania, “ said Craig Davis, executive vice president of mortgage origination for American Savings Bank in Irvine. About 65% of the loans made by American Savings in January were refinances, he said. For October, the number dropped to about 35%.
“We are focused now on new-home loans, mostly adjustable rate mortgages,” Davis said.
He said American Savings, Orange County’s largest thrift, expects to make $500 million in new-home loans during November, which would be a company record.
Drag on the Market
Home loan refinancing in October was at the lowest level in more than five years across California. Number of refinance transactions:
County Oct. 93 Oct. 94 Pct. change Los Angeles 27,107 5,811 -78.6 Orange County 13,084 1,685 -87.1 Riverside 4,934 717 -85.5 San Bernardino 5,826 775 -86.7 San Diego 11,310 1,750 -84.5 Ventura 2,890 509 -82.4 Southern California total 65,151 11,247 -82.7 All California 124,232 19,968 -83.9
Source: Dataquick Information Systems
