The states that contract the most mortgages


The states that contract the most mortgages

A for sale / sold sign in front of a blurry white two story house with black shutters.

Sales of existing homes hit their highest level in 15 years in 2021, according to the National Association of Realtors. It was largely driven by record mortgage rates and the need for more ex-urban space after coronavirus pandemic restrictions. Thirty-year fixed-rate mortgage levels in 2021 have reached around 3.1%, which is lower than current rates of almost 6%, pushed higher by the Federal Reserve’s attempts to rein in inflation rampant in the housing market.

American Home Shield analyzed home loan origination data from the Consumer Financial Protection Bureau to see which states took out the most mortgages per 10,000 homes in 2021, the latest information available. The rate was determined by dividing the total number of primary mortgages issued in each state by the number of owner-occupied homes.

There are four common types of mortgages that a potential homeowner can take out to finance their purchase: a conventional loan, a bank-issued mortgage; a Federal Housing Administration loan, a government-backed mortgage with lower requirements than a conventional loan; a VA loan, mortgage for active duty or retired members of the US military; and an FSA loan, available to farmers through the United States Department of Agriculture’s Farm Service Agency.

Americans took out more than 5.2 million mortgages in total last year, as properties traded hands at a rapid volume and pace not seen since a U.S. real estate market last booming collapsed. However, the housing market crash of the late 2000s was primarily driven by unsustainable lending practices and excessive debt levels. Economists and other analysts maintain that this time is different and that Americans expect a “correction” in house prices rather than another bubble bursting.

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10 States That Have Taken Out the Most Home Loans

Top 10 states with the most home loans

Homebuyers took out the most mortgages for a primary residence — not investment properties — in Utah, Colorado, Idaho and South Carolina. The states with the most mortgage activity are also among those that have seen their housing markets overheated by COVID-19-era interstate migration. The fewest home loans were taken out in New York, West Virginia, Mississippi, Pennsylvania and Vermont last year.

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How mortgage rates vary by state

A map of the states that take out the most home loans.

The Midwest and Mid-Atlantic states along with Florida and Alaska were the hottest states for new home loans last year. Migration trends for Americans have changed since the arrival of COVID-19 in 2020. Not only have record numbers of Americans leaving the workforce and retiring in recent years, many working-age Americans have spent the year to seek more space to change work routines. These Americans are also moving to less expensive and less dense areas.

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The share of different types of mortgages taken out by the state

Breakdown of loans in each state.

Conventional loans were the loan type of choice for the majority of homebuyers in 2021. Homebuyers in Alaska used conventional loans less than any other state. Homebuyers took out more VA loans there than in other states.

FHA loans were the next most common to be issued nationwide. Compared to a conventional loan, these loans have lesser requirements regarding the amount of money a buyer has to put down as a deposit. FHA loans often help first-time home buyers enter the housing market. Rhode Island led all other states in FHA loans last year, accounting for nearly 1 in 4 home loans originating in the state. Louisiana had the second largest share with 22% of all loans.

The highest percentage of VA loans by state were made in Alaska, with nearly a quarter of all loans issued, followed by Hawaii and Wyoming. The three states are somewhat isolated geographically from the rest of the country and have large US military bases and large veteran populations.


How the housing market has changed in 2021

A three-person construction team works on the frame of a two-story house in the hills.

Ever since the United States passed more mortgage regulations, following the housing crash of the 2000s, applying for a home loan has been an intensive process. Underwriting requires borrowers to open up their financial history to banks that lend them hundreds of thousands of dollars, and the whole process can easily take a month or more. But the housing market got so hot in 2021 that even getting a mortgage was often not enough to secure you a purchased home. A combination of lagging new home construction and soaring demand has accelerated the home buying process, pushing U.S. real estate prices to levels never seen before.

Residential construction came to a near halt in the spring of 2020 as COVID-19 workplace regulations were enacted in the United States. A year later, properties were selling in record time as builders struggled to finish enough homes to meet demand.

Americans have seen pandemic-cut interest rates as an opportunity to upgrade to more living space, a safer or warmer geographic location, or closer proximity to friends and relatives. According to data from the Federal Reserve Bank of St. Louis, during the summer months, typically the annual peak of real estate activity, listings were selling twice as fast as before the pandemic. It wasn’t until the Fed raised interest rates in March that home sales began to slow.

This story originally appeared on American Home Shield and was produced and
distributed in partnership with Stacker Studio.

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