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COVID-19 pushed the U.S. economy into a historic recession, but it's no secret that many Americans' personal finances have remained intact during the crisis. In few places is this more evident than the housing market, which saw surprising growth and increased competition over the past year.
Early in the pandemic, Congress took steps to protect consumers' finances by, among other things, halting evictions for renters and expanding forbearance options for borrowers. During the same period, mortgage interest rates dropped to their lowest point in at least 40 years and a shift to remote work allowed many people in expensive cities to find cheaper living options elsewhere.
Housing Inventory Shortage Stoked Market Competition
The confluence of these factors resulted in a booming, competitive housing market. At the same time, many homeowners who may have moved in less turbulent times instead stayed put—many taking advantage of low interest rates to refinance—which contributed to the shortage of inventory for buyers. With fewer homes for sale, more than half of houses sold above their asking price in May 2021, according to Redfin.
The inventory shortage, paired with the allure of low interest rates and the migration from expensive cities like New York, helped send housing prices to record highs, forcing buyers to adopt competitive tactics in order to close deals. Many people, facing bidding wars with other buyers, made offers sight-unseen. In May 2021, nearly half of all homes for sale (45%) were sold within a week, and a record high of 58% were sold within two weeks, according to Redfin.
Refinanced Loans Built on Existing Momentum
When the U.S. Federal Reserve cut its target interest rate to 0% during the pandemic, consumers swiftly responded by taking advantage of low rates, either by getting new mortgages or refinancing existing loans. But this scramble built on a year that had already seen increased mortgage activity.
While much of the increase occurred between the beginning of 2020 and May 2021, similar—and in many cases larger—changes occurred from January 2019 to January 2020.
This was due to mortgage rates falling consistently over the past few years, with refinancing in particular seeing a significant increase since early 2019. In fact, from January 2019 to January 2020, mortgage origination amounts for refinanced loans increased by 537%, according to Experian data.
These market trends spurred significant growth in states' total mortgage origination amounts, or the total dollar amount of all mortgages taken out (originated) in that time period. The following Experian data notes the states with the highest and lowest changes in originations since January 2020. Included below are changes to total mortgage origination amounts per state for the periods of January 2019 through January 2020, and January 2020 through May 2021 (the most recent month on record).
Top 20 States With the Largest Mortgage Origination Increases
Virginia—which includes part of the Washington-Arlington-Alexandria metro area—recorded the largest increase of any state, growing mortgage origination amounts from $7.5 billion to $18.1 billion, or 141%, since January 2020, according to Experian data. Not only did originations grow rapidly since the pandemic started, but Virginia also recorded a significant increase of 118% between 2019 and 2020, a sign that demand for homes in that area is continuing to grow.
In contrast, Mississippi was the state with the second-largest increase since January 2020, growing mortgage origination amounts by 139%. Though originations in the state saw one of the largest spikes in 2020, between 2019 and 2020 the state saw the fourth-smallest growth of any state. This shows that while consumer demand for homes in the state may be surging now, this behavior could be new and not a continuation of a previously existing trend.
Top 20 States With Largest Increase in Mortgage Origination Amounts
| Top 20 States With Largest Increase in Mortgage Origination Amounts | ||
|---|---|---|
| State | January 2019 - January 2020 Increase | January 2020 - May 2021 Increase |
| Virginia | 118% | 141% |
| Mississippi | 53% | 139% |
| Alabama | 83% | 131% |
| Illinois | 87% | 127% |
| New Jersey | 94% | 124% |
| Georgia | 88% | 120% |
| Alaska | 81% | 118% |
| New Mexico | 87% | 118% |
| Louisiana | 60% | 115% |
| Arkansas | 62% | 115% |
| Montana | 83% | 115% |
| South Carolina | 94% | 114% |
| North Carolina | 130% | 114% |
| Connecticut | 98% | 113% |
| Texas | 66% | 110% |
| Hawaii | 96% | 110% |
| Minnesota | 108% | 110% |
| District of Columbia | 103% | 107% |
| Delaware | 91% | 107% |
| Pennsylvania | 78% | 106% |
20 States With the Smallest Mortgage Origination Increases
When it came to states with the smallest increase in mortgage origination amounts, New York saw the least change, with just a 72% increase since the onset of the pandemic, according to Experian data. This is in line with the many media reports on the exodus from New York City during the pandemic, which saw remote workers flee the expensive city for more suburban and rural areas.
A contrast from the list of states with the largest increases in originations in 2020, in several instances, the states with the lowest increase in originations in 2020 actually recorded significant increases the year before. Colorado, for example, which saw the second-smallest increase from $9.9 billion to $17.3 billion (75%) in total origination amount since January 2020, recorded the fifth-largest spike in 2019—133% (a move from $4.2 billion).
20 States with Smallest Increase in Mortgage Origination Amounts
| 20 States with Smallest Increase in Mortgage Origination Amounts | ||
|---|---|---|
| State | January 2019 - January 2020 Increase | January 2020 - May 2021 Increase |
| New York | 79% | 72% |
| Colorado | 133% | 75% |
| Indiana | 85% | 76% |
| Vermont | 63% | 77% |
| Nebraska | 68% | 78% |
| Ohio | 78% | 80% |
| Nevada | 115% | 80% |
| West Virginia | 53% | 83% |
| Arizona | 131% | 83% |
| Oklahoma | 52% | 84% |
| North Dakota | 73% | 85% |
| New Hampshire | 113% | 85% |
| Maine | 100% | 87% |
| Michigan | 104% | 89% |
| Washington | 137% | 92% |
| Kentucky | 78% | 94% |
| Utah | 169% | 95% |
| Oregon | 124% | 96% |
| Iowa | 43% | 96% |
| Wisconsin | 102% | 97% |