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posted on 20 October 2015

Condo And Co-Op Lending In An Upswing. Originations Up 31 Percent With California Markets Leading The Growth.

from CoreLogic

Condominium and housing cooperative (co-op) mortgage originations nationwide rose 31 percent to $39 billion in the second quarter of 2015 compared with $29.7 billion in the same quarter of the previous year (Figure 1). The growth was driven mainly by a 65-percent increase in the dollar volume of refinance loans. However, purchase money and closed end/home equity line of credit (HELOC) loans also showed 13 percent and 29 percent increases, respectively1. Purchase money originations of $19.6 billion were at the highest levels since the end of 2007 when it was at $21.3 billion.

Condo and co-op lending has historically been concentrated in higher-density, urban markets across the U.S. Figure 2 shows a pie chart of markets with the biggest share of condo and co-op lending. Over 50 percent of the nation's open condo and co-op mortgages are located in eight Core Based Statistical Areas (CBSAs). In terms of recent lending, Figure 3 shows the top 25 condo and co-op counties by dollar volume of loans originated in the 12 months ending June 2015. Out of the top 25, nine counties were from California with Los Angeles ranking first in new loan originations of $12.2 billion, or 9 percent of nationwide lending on condo and co-op homes. Cook County, IL followed second with $7.4 billion in originations. Seven counties on this list experienced over 25 percent year-over-year growth and all were from California. New York and Kings Counties, NY, as well as Broward County, FL, experienced 12 percent, 4 percent, and 1 percent declines, respectively.

Part of the increase in lending reflects a gradual decline in condo and co-op cash sales. Cash sales made up 47 percent of total condo and co-op sales in June 2015, down from 50 percent in June 2014 and down from its peak of 63 percent in February 2012. The year-over-year share has fallen each month since March 2012. Prior to the housing crisis, the average percentage of condos and co-ops purchased with cash in the U.S. was approximately 27 percent, still well below current levels. Some markets have been affected more than others with all-cash buyers. Figure 4 compares the shares of condo and co-op cash sales by CBSA2 in June 2015 with levels back in June 2006, just before the housing bubble burst. West Palm Beach-Boca Raton-Delray Beach, FL had the highest cash sale share in June 2015 at 80 percent, up 46 percent from June 2006. The second highest was Fort Lauderdale-Pompano Beach-Deerfield Beach, FL with a cash sale share of 77 percent in June 2015, up 57 percent from June 2006.

Condo and co-op markets with the most influx of cash buyers since 2008 could result in the largest opportunities for lending. However, tighter eligibility requirements on condo and co-op lending after the recent financial crisis have made it more challenging to qualify for a mortgage. Building efficiencies in the loan approval process to make housing credit more accessible and affordable to consumers will be a critical factor in the continual recovery of the condo and co-op mortgage industry.

[1] HELOC line amounts are depicted instead of actual drawn amounts.

[2]The top 20 CBSAs ranked by total condo and co-op sale counts in June 2015 are shown in the figure and account for over 50 percent of total sales in the month.

© 2015 CoreLogic, Inc. All rights reserved.

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