HELOC volume slips in 4Q, ending hot streak

One of the trendiest loan products during last year's up-and-down market is seeing fading interest. 

Home equity line of credit volume fell 16.2% in the final three months of 2022 compared to the third quarter of last year, according to Attom. The 313,973 HELOCs in the fourth quarter however still accounted for a hearty $60.1 billion in volume and made up 20.7% of all loans to close the year.

"The direction of interest rates this year will dictate whether HELOC activity stays high as a portion of overall activity or households return to cash-out refinancing deals to help pay for big-ticket expenses," said Rob Barber, chief executive officer at Attom, in a press release Thursday. 

Mortgage rates peaked at 7.08% in early November, according to Freddie Mac, and since fell, although as of last week they hovered above 6.5%. 

The products rose in popularity last year as rising home values emboldened homeowners to benefit from their newfound equity. HELOCs comparatively made less than 5% of originations in the first few months of 2021 in the midst of the refinance boom, according to the real estate data intelligence provider. Despite enjoying collective gains of trillions of dollars of value last year, homeowners began to see that benefit slow as property values fell with waning demand. 

Muted fourth quarter HELOC demand was still 31.8% greater than the same time in 2021, when borrowers took out 238,164 loans for $47.2 billion of volume. The recent end-of-year dip followed HELOC growth in five of the previous six quarters, Attom said, including $72.3 billion in HELOC volume between last July and September from 374,703 loans.

Some of the country's more attractive mid-sized markets saw quarterly HELOC originations fall by over a third including Buffalo, New York down 45.1%; San Jose, California down 38.9%; and Sacramento, California, down 35.5%.

The HELOC slide mirrored a 24% decline in total mortgage volume quarter-to-quarter, Attom said, with 1.52 million originations for residential properties between 1 to 4 units at the end of the year. That was the seventh consecutive quarterly decrease in overall origination volume, down 56% compared to the fourth quarter of 2021 and the lowest figure since the beginning of 2014.

Purchase originations of 708,739 mortgages in the fourth quarter fell 26.1% from the prior three months, with a dollar figure dropping 28.4% to $257.5 billion. Home buying declined in 98% of the 191 metropolitan areas analyzed by Attom, rising in just three Florida cities: Ocala (up 12.7%); Port St. Lucie (3.2%); and Naples (0.4%).

Meanwhile, refinance activity of 496,221 loans fell 26.7% from the third quarter and hit its lowest count since the first quarter of 2000, Attom said. That volume fell to $157.9 billion from $217 billion the quarter prior. Compared to the end of 2021, refis were down 73.4%, findings in line with recent industry reports. 

Refinance activity ticked up in just five metros east of the Mississippi River: Peoria, Illinois; Binghamton, New York; Dayton, Ohio; Ann Arbor, Michigan and Atlantic City, New Jersey.