What Real Estate Slowdown? Credit Unions Continue to Post Strong Volume at Mid-Year

Credit union results in the first six months of 2006 are running counter to headlines of a cooling housing market.


Mid-year data is in and credit union results are running counter to the headlines of a slowing economy and housing market. Loan originations of $125.7 billion for the first half of 2006 are up almost $2 billion from the first half of 2005. Loans outstanding have increased 9.7% over the past 12 months in America’s 8,720 credit unions to reach $487.5 billion.

Although recent reports on the housing market show slowing home sales, real estate lending continues to be a key driver of loan growth in credit unions. Total real estate loan originations are up 4% versus the first half of 2005. Home equity lending is particularly strong as the Fed’s tightening cycle led many consumers to convert adjustable rate to fixed rate loans.

Total home equity originations are up more than 11% versus 2005, and this will be the first time in five years that fixed rate home equity originations have exceeded adjustable rate originations. Credit unions originated over $11.6 billion of fixed rate home equity loans in the first six months of the year, up nearly 47% from a year ago. Meanwhile, adjustable rate HELOC volume declined nearly 14% to $9.2 billion.

Similar, though not as pronounced, results come through in first mortgage originations. Total originations are down 1.8% in 2006 with adjustable rate first mortgage originations down 3.5% while fixed rate originations are flat compared to 2005. Overall, real estate loan originations account for 38% of total lending volume in the first half of the year, up slightly from the 37% it accounted for over the same period in 2005.

Although the housing market is slowing, national mortgage origination volume continues to be strong compared to historical trends. The Mortgage Bankers Association predicts that total first mortgage origination volume will be $2.37 trillion in 2006, the lowest in five years but still above the annual average for the last eight years. Strength will remain as the purchase mortgage market is expected to be just below last year’s record pace.

For a complete review of the mid-year results for credit unions as well as insights from credit unions that are realizing opportunities in the current market, join your peers on Callahan & Associates’ complementary Trendwatch call on August 29 th or 30 th.