Crash, Correction or Chill looks at economic and real estate trends that offer clues about the depth of housing problems.

Buzz: Mortgages in California have seen a record drop this summer as soaring interest rates have made most loans unaffordable.

Source: My trusted spreadsheet analyzed Mortgage Trends in the Third Quarter by Attom. These statistics, dating back to 2000, are based on lending in 210 metropolitan areas nationwide, including 19 regions in California.

Top line

Californians in 19 metropolitan areas took out 177,566 mortgages from July to September.

This is the second slowest three months of the century. It’s also a staggering 63% drop from a year ago, making it the biggest 12-month drop ever.

Yes, this home loan crater is deeper than anything we witnessed during the housing crash of the mid-2000s.

How did this happen?

The Federal Reserve raised interest rates to fight rising inflation. Over the past 12 months, the average 30-year loan has risen to 6.9% from 3.1%, according to Freddie Mac.

Skyrocketing interest rates have slashed the homehunter’s potential borrowing power by 35% in a year and surpassed the 33% drop from 1980, another era of high inflation when interest rates rose to 16.3% from 10.5%.

So this summer, mortgages for home purchases are down 53% from last year. And homeowners refinanced 82% fewer loans.

Strikingly, owners took out 74% more mortgages. This tactic has become the preferred way to get cash out of your home without missing out on great rates on an older mortgage.

By the way, this is not just a Californian trend. Every U.S. subway tracked by Attom has seen fewer mortgage transactions over the past year.

The nation, excluding the California subway, had 1.8 million mortgages this summer – a 44% drop in 12 months, also the biggest drop ever. There were 30% less purchase loans and 66% less refis, but 45% more mortgages.

Crash, correction or chill?

crash: If you’re making a living off your mortgage, it’s a huge disaster. No loans. No withdrawals.

Mortgage broker Jeff Lazerson, associate of Southern California News Group, recently wrote that it had laid off two-thirds of its staff: “Business has almost come to a standstill for mortgage lenders. And yes, it’s much worse than the mortgage collapse I remember from the Great Recession.”

Adjustment: For the broad housing market, this is part of a recovery from a boom fueled by the Fed’s cheap money policy of the early pandemic era. This year’s increase in interest rates is aimed at slowing down the entire economy, as well as the housing market.

Chill: Overall, this dramatically slowed lending is a relatively minor annoyance.

Losing home sales is an economic downside. But remember, with 30-year fixed-rate mortgages, the Fed’s gift to any owner who has refinanced in recent years stays put.

That extra cash from shrunken mortgage payments is still being spent. It’s one piece of an overheated, inflation-filled economy. And the improved cash flow in the household can be a financial cushion in the event of a significant economic downturn.


Lenders have been very conservative about who gets mortgages this cycle. So it’s a reasonable assumption that the surge in home equity loans is being done cautiously. (Fingers crossed!)

But if the rise in home equity loans is driven by the financial strain on borrowers, it is a worrying pattern for the broad economic picture.


As mortgage lending slows down in some of California’s largest housing markets, ranked by the size of the annual fall in lending over the summer…

San José: 8,114 mortgages issued in the third quarter, down 71% (#1 drop among all U.S. cities). This was due to 60% fewer closed purchase loans, 89% fewer refinances, but 46% more home equity loans.

San Francisco: 22,048 mortgage loans, down 67% (No. 5 out of 210) – 56% less purchase loans, 86% less refis, but 35% more equity loans.

Ventura County: 4,212 mortgage loans, down 65% (no. 8) – 54% less purchase loans, 86% less refis, but 85% more equity loans.

San Diego: 16,835 mortgage loans, down 65% (no. 9) – 56% less purchase loans, 84% less refis, but 79% more equity loans.

Los Angeles-Orange County: 51,431 mortgage loans, down 64% (No. 12) – 55% less purchase loans, 83% less refis, but 82% more equity loans.

Sacramento: 15,422 mortgage loans, a decrease of 62% (no. 18) – 49% less purchase loans, 83% less refis, but 94% more equity loans.

Inland Empire: 28,247 mortgage loans, a decrease of 60% (no. 22) – 49% less purchase loans, 78% less refis, but 127% more equity loans.

Jonathan Lansner is a business columnist for the Southern California News Group. He can be contacted at

#Mortgage #California #drops #Mercury #News

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