Home prices continued to rise last year, but they're slowing down from their post-recession pace.

That trend, plus rising interest rates, is leading some lenders to believe this year will show only modest gains in purchase mortgage originations.

Prices rose in 2017 in all but five of the 112 metro areas examined by ATTOM Data Solutions in a housing report released by the Los Angeles company Thursday, but in 77 cities the 2017 increase was smaller than the average yearly increase from 2012 to 2016.

The median U.S. home price rose 8.3% to $235,000 in 2017, compared with average annual increases of 10.3% per year from 2012 to 2016, according to the report. Prices are still below pre-recession peaks in 45 metro areas.

Daren Blomquist , ATTOM Data Solutions' senior vice president, said “high-flying markets” like Phoenix, Ariz., which were among the first to bounce back from the recession, are now growing at a slower pace.

Blomquist expects housing prices will continue to rise at a slower pace this year.

“I think it's actually healthy,” he said.

In Phoenix, prices plunged from a high of $253,000 in 2006 to a low of $110,250 in 2011. Prices rose 14.5% per year from 2012 to 2016, and 6.3% last year to $232,000 — still below the pre-recession peak.

In Atlanta, prices hit bottom at $100,000 in 2012. Over the next four years they rose 20% per year. Last year they rose 5.5% to reach an all-time peak of $190,000.

“That's still a very robust market,” Blomquist said. “What I like about it is that the market is actually behaving rationally, not continuing to inflate.

“One of the reasons for that is markets like Atlanta are transitioning from investor driven to owner-occupant driven markets, which is bringing them back to earth,” he said. “They're constrained more by affordability than they were before.”

In four California metro areas — Los Angeles, San Jose, San Francisco and San Diego — median home prices ranged from $525,000 to $960,000 in 2017. In 2016 the medians ranged from $485,000 in San Diego to $847,000 in San Jose's Silicon Valley, or seven to eight times median household wages.

Nationwide, credit unions granted $144.2 billion in first-lien mortgages in the 12 months that ended Sept. 30, 2017, up 9% from a year earlier. Second-lien originations grew 16% to $32.8 billion, while non-real estate originations grew 9% to $304.1 billion.

Nassau Educators Federal Credit Union of Westbury, N.Y. ($2.8 billion in assets, 178,373 members) originated about $160 million in first-lien residential mortgages last year, ending 2017 with $450 million on its books. This year, it expects originations will be flat.

Chuck Price, NEFCU's vice president of lending, said the limiting factor on mortgages is a tight supply of homes. Only about a four-month' supply is on the market, when usually the number of homes carrying for-sale signs would equal the volume of homes sold over six to eight months.

“There's not much new construction, and there's not a ton of homes changing hands,” Price said.

Economists at the Mortgage Bankers Association in Washington, D.C., expect purchase originations will grow 7% this year, and 5% per year through 2020. However, rising interest rates will cause refinances to continue to fall, with a drop of 29% this year and 7% in 2019.

The new tax law will make the deductibility of mortgage interest less valuable because of higher standard deductions for middle income borrowers and higher caps for upper income borrowers. MBA Chief Economist Mike Fratantoni said the changes have the greatest potential to impact home equity borrowing, but on the first-lien side, cash-out refinancings might be vulnerable.

“We were already forecasting a fairly sizeable decline in refinance volume, so it could be a little bit more,” Fratantoni said.

For first-lien purchase loans, Fratantoni said the tax law won't affect decisions on whether to buy a home, but it might cause consumers to borrow less by making larger down payments or buy less expensive homes.

At Allegacy Federal Credit Union in Winston-Salem, N.C. ($1.4 billion in assets, 139,475 members), second-lien originations for the 12 months ending Sept. 30 were basically flat: $81.7 million, up 1%. Meanwhile, first lien originations grew 47% to $168.6 million, and non-real estate loans rose 34% to $220.6 million.

Malia Shelton, Allegacy FCU's mortgage loan operations manager, said members who come in about first mortgages are asking about the size of their monthly payment, the amount they can qualify for and the types of loans available.

“We've not yet had a member as they're looking to buy their next home talking to us about interest deductibility,” Shelton said.

Instant Insights /

Home Prices Moderate in Most Markets

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