Wells Fargo WFC, +0.90% the largest U.S. mortgage producer, reported that second-quarter originations hit $62 billion, up 32% from a year earlier. Meanwhile, J.P. Morgan Chase JPM, +1.40% said its originations reached $29 billion, up 74% from a year earlier.
“It was a strong quarter” for the purchase market, John Shrewsberry, Wells Fargo’s chief financial officer, told analysts on a Tuesday call. “California, New York, Southern Florida, Denver are particular markets where we’ve seen a lot of strength.”
He added that housing was affordable in the second quarter, supporting mortgage applications.
“While home prices have moved, they are still affordable. While rates have moved, they’re still affordable, so that’s helping a lot,” Shrewsberry said. “And we’ve had an improving jobs market which brings more people into eligibility for a purchase or refinancing.”
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Because of the hot spring- and summer-sales market for homes, analysts expect to see the number of mortgages to buy a residence increase in the second quarter from the first quarter. For example, the share of Wells’s originations that went to purchase a home rose to 54% in the second quarter from 45% in the first quarter.
Tracking annual growth for mortgages gives a sense of trends for lending and sales. Of note, Wells reported that the share of originations made up by purchase loans fell by 20 percentage points over the past year, while the dollar value of these loans declined by 4%.
Looking at the broad U.S. mortgage marketplace, loan applications to buy a home recently climbed close to the highest level in two years. Various factors are contributing to fast lending growth, including that mortgages are rising from post-crash lows. Also, as the jobs market strengthens, more families are becoming willing and able to buy a home. A stronger economy has also inspired more confidence in lenders.
Recent economic reports show that home sales are running at the fastest pace in eight years. Deals for new and used homes are on the upswing, with young families and other first-time buyers making more home purchases.
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Despite lending growth, it’s still tough for many families to get a home loan. Recent readings on mortgage-credit availability show that access is still far below pre-bubble levels. In the wake of the financial meltdown, lenders erected high hurdles for borrowers to get a loan, looking to protect themselves from the financial and legal fallout tied to mortgages that go bad.
Trying to spur lending activity, federal officials have taken steps to lower mortgage costs and deepen the pool of potential buyers. Still-low but rising mortgage rates may also encourage some fence-sitters to buy a home in coming months.