Releases of deeds of trust surge in Mesa County

A release of a deed of trust is an event that occurs when a deed of trust (often referred to as  a mortgage) is paid off, either through refinance, sale, or when all payments have been completed on a home loan. It is a "positive" economic indicator in sense that areas with improving economies tend to generally also report increases in releases of deeds of trust.

Other factors can be important as well. In cases where there is a housing shortage, but other economic indicators are robust, we might also see declining release activity. It's not always easy to know which factors are the key factors in whether or not releases are going up or down. 

We do know, though, that releases tend to go up when interest rates fall. And releases tend to go down when interest rates rise. We've seen this in the combined release data for the state's biggest countries.

Combining the state's big metro counties (plus Broomfield County) we saw that releases headed down in late 2018 as the Federal Reserve began to allow the fed funds rate to rise. The mortgage rate then followed suit, and releases trended downward. During 2019, however, the Fed began to push rates down again, and releases rose again at the same time:

So far, I only have the data for the combined metros through October. 

An odd thing happened in Mesa County during December, though. According to the Mesa County public trustee's latest data, releases spiked to the highest level I've seen since I began keeping track of releases back in 2008. 

Releases have generally been hovering between 600 and 800 per month in the county over the past two years. But in December, the total shot up to 1,253. That's a huge increase. For instance, in December 2018, the total number of releases was 569:

Based on what I have so far for the other metro counties, many counties are experiencing sizable increases — but this increases appears to be significantly larger than the other counties.  I spoke with the Mesa County PT and confirmed this is correct data, and it is not due to an administrative backlog or an artifact of processing. It does appear to be a result of real events in the local economy. It appears many homeowners in Grand Junction had the opportunity to refinance in December, and many took it. 

We'll know more at the end of January if this is a trend, or if just a quick spike that will soon return to normal. But in either case, the surge in releases suggest confidence in the local housing market on the part of lenders and investors in the secondary market. It may also suggest lenders anticipate the Fed will continue to take a dovish view on inflation and interest rates.

Home-loan payoffs in Colorado increase in 2016 after fourth-quarter surge

In Colorado, a release of a deed of trust occurs when a real estate loan is paid off whether through refinance, sale of property, or because the owner has made the final payment on the loan. Increases in release activity occur as refinance and home-sale activity increases, and rising release totals generally indicate increases in the demand for home loans and real estate.

Every quarter, I monitor release activity in 21 counties based on population size and to ensure that as many regions of the state as possible are represented. More than 90 percent of all occupied households in Colorado are within the twenty-one counties chosen:

The number of home loans paid off in Colorado was up 14.4 percent from the fourth quarter of 2015 to the fourth quarter of 2016. Comparing the full year of 2016 to 2015, the total was up 2.8 percent. 

Looking at all counties' measures, we find that during the fourth quarter of 2016, most areas reported increases in releases of deeds of trust: 

Year over year, the largest increase was in La Plata County and the largest decline was in Alamosa County.

Taking the year as a whole, the changes were less dramatic: 

Statewide, releases were up 2.8 percent for the year overall. Again, La Plata County showed the largest increase, but Eagle County, in this case, shows the largest decline. 

The fourth quarter of 2016 showed a sizable surge in release activity as can be seen in the first graph: 

For the fourth quarter of 2016, there were 93,147 releases, which makes the quarter the second-highest in releases since I began tracking the quarterly totals in 2008. During the fourth quarter of 2015, there were 81,398 releases. Over the past two years, there has been a sizable trend upward in release activity. 

Although quarterly data only goes back to 2008, I do have annual data going back to 2000. Looking at annual data, we find that 2016 was not an especially remarkable year, in spite of the fourth quarter's surge: 

Releases did hit a 3-year high in 2016, but this was comparable to what we saw in 2012 and 2013. Totals remain well below where they were in the run-up to the housing bubble in 2002, 2003, and 2004. 

So where is release activity most concentrated? In raw numbers, we naturally expect the most activity in the most populous counties. However, when we adjust for the total number of households in each county, we find: 

In this case, a small number means more release activity given the population size. So, the county with the most release activity per household is Summit County with only 6 households per release. The least-active county is Alamosa County with 48 households per release. 

If we had to identify factors that lead to more release activity, we could likely point to median income and employment trends as factor, as well as overall demand for real estate in that area. There isn't a flawless correlation here, but counties like Douglas, Weld, and Jefferson continue to see fairly solid employment and income numbers while some counties at the bottom of the list — Pueblo and Alamosa Counties, for instance — tend to have lower incomes and/or less job growth. 

And finally, it's always helpful to compare release activity against trends in mortgage rates. Since refinance activity is a large factor in release activity, we find that, historically, falling interest rates have tended to spur more release activity.

This appears to still be the case, and we can see that in the quarters following declines in the mortgage rate, we see increasing release activity:

There is a lag here, so the 4th Q's surge represents the result of the overall decline in mortgage rates that occurred through most of 2016. Note also how in the quarters immediately following the increases in the mortgage rate in 2013, releases fell to a multi-year low. 

In late 2016, mortgage rates began to climb and remain above four percent during the first quarter of 2017. This is likely to lead to a leveling off in release activity, although this may not be apparent until after the first quarter this year. Moreover, a continuation of strong employment trends may mitigate interest-rate-based downward pressure on home sales and refi activity — and prevent sizable declines in release activity as well. 

Note on sources: all release activity is collected from the public trustee in each state listed. 

Releases of Deeds of Trust in Colorado Go Nowhere for Nine Months

Releases of deeds of trust during the first quarter of 2015 were up in Colorado compared to the first quarter of 2014, although release activity has been flat since the middle of 2014.

During the first quarter of 2014, there were 64,632 releases of deeds of trust in 21 Colorado counties surveyed. During the same period of 2014, there were 50,128 releases, for a year-over-year increase of 28.9 percent.

A release of a deed of trust is an event that occurs when a deed of trust (often referred to as  a mortgage) is paid off, either through refinance, sale, or when all payments have been completed on a home loan. It is a "positive" economic indicator in sense that areas with improving economies tend to generally also report increases in releases of deeds of trust. Mortgage rates tend to be a major factor in release of deeds of trust activity since release trends tend to reflect refinance and home purchase activity.

Compared with the last quarter of last year, release activity declines slightly from 65,842 to 64,632 — a decline of 1.8 percent.

As the first graph shows, however, total release activity has changed very little of the past three quarters:

The chart shows the totals for each county surveyed, with a year-over-year comparison. We see that only Alamosa County reported a decline in release activity. So, overall, we can say that real estate transaction activity has been generally increasing across the state, with the possible exception of the San Luis valley. All other regions show increases, however.

So, how does the first quarter compare? If we compare the first quarter of this year to other first quarters, we see that 2015's first quarter is about in the middle. Totals were down considerable from 2013's very high numbers, but up compared to 2009, 2010, and 2014:

Over the past three quarter, though, activity has changed little. Only Eagle County has shown a large swing in recent quarters with the rest of the counties surveyed reporting very muted changed, none of which exceed 10 percent movement in either direction:

Why so little change? What's surprising is how little release activity has moved in recent quarters in spite of new declines in the mortgage rate. Historically, release activity increases when mortgage rates fall. However, in recent quarters, we see that the 30-year conventional mortgage rate is falling with very little reaction in terms of releases. This suggests a couple of things: It tells us that loose monetary policy is having a diminished effect on real estate activity, and it also suggests that inventory is very low. Moreover, it also suggests that those who have been eligible for refinance in recent years have already done their refinancing. In other words, the households who are likely to buy new homes or refinance have already largely done so. The sorts of release activity we'd expect from a mortgage rate below four percent haven't been showing up. 

Finally, let's compare all the counties surveyed taking population size into account. If we look at the total number of households per release, we find that Summit county has the most release activity while Alamosa had the least (a lower number in the right column indicates less activity.) As is often the case, we find that mountain areas and more high-income areas show the most activity while lower-income and areas with less fashionable real estate shows less release activity. This isn't a rock-solid rule, but in general, it is often the case: 

Overall, release activity is moderate, as might be expected in relatively high-demand real estate markets as are found across much of Colorado. However, if we look at longer historical trends, we find that activity is down considerable from the days of the 2003-2007 housing bubble in spite of rock-bottom mortgage rates (2015 is 1st Q only): 

Releases of Deeds of Trust in Colorado Metros Stall in Spite of Record-Low Mortgage Rates

Releases of deeds of trust during the first half of 2014 were down significantly in Colorado metros compared to 2013 during the same period, and were flat from the first quarter of 2014 to the second quarter.

During the first half of 2013, there were 179,747 releases of deeds of trust in Colorado metros, and during the same period of 2014, there were 92,955 releases, for a year-over-year decline of 49.4 percent.

A release of a deed of trust is an event that occurs when a deed of trust (often referred to as  a mortgage) is paid off, either through refinance, sale, or when all payments have been completed on a home loan. It is a "positive" economic indicator in sense that areas with improving economies tend to generally also report increases in releases of deeds of trust.

For the second quarter alone, across Colorado's metropolitan counties, 46,696 deeds of trust were released. That's a 0.9 percent increase from the first quarter of 2014 when there were 46,259 releases.

Compared year over year for the second quarter alone,  releases were down 47.1 percent from the second quarter of 2013 when there were 88,217 releases. 2014's 2nd-Q releases were down 22.4 percent from the same period of 2012.

The first graph shows the quarterly total for releases. We can see that totals were near the lowest level recorded since 2008, and were quite low for all of the first half of 2014.

The second graph shows release totals compared against the same quarters for each year. Note that the second quarter of 2014 is the lowest quarterly total for releases recorded since 2008. The same was true of the first-quarter total. 

The low levels of release activity persisted in spite of the fact that mortgage rates continue at very low levels. Release activity is generally tied closely to movements in the mortgage rate, and refinances especially tend to increase as mortgage rates move down. However, in spite of low rates, releases have remained low, suggesting that the market for refinances has been largely exhausted. 

The third graph shows the relationship between the mortgage rate and release totals. While mortgage rates have increased from the extremely low levels seen during 2012 and 2013, rates still remain at historic lows under 4.5 percent. This, however, has failed to produce the sort of new loan activity seen during periods with rates that were 50 basis points higher, back in 2009. 

So far this year, compared to previous years, release activity is on schedule to finish down more than 50 percent compared to last year. The next graph shows total annual release activity, plus the first half of 2014:

Regional Comparisons 

Looking at release activity on a county by county basis, we find some significant changes in trends. The first chart shows quarter over quarter changes in each county surveyed. Douglas County, which, as a high-income county, typically tends to outpace other counties, but in this case saw a large drop off over the period.

The second chart shows year-over-year changes. In this case we find more uniformity in that all counties reported declines, year over year for the second quarter. Weld County, not surprisingly reported the smallest decline, owing at least partially to large amounts of oil-driven economic activity in the region.

The third chart shows year-over-year changes for the first half of each year. In this case,  all counties reported declines year over year with the smallest declines coming from Weld and Denver counties.

And finally, we can compare the counties more accurately by adjusting release activity for the total number of housing units in each county. In this case, we see the largest amount of release activity was in Weld, Larimer, and Jefferson counties, and the lowest amount was in Douglas County. 

It is unclear why Douglas County would show so little activity at this time, and it does suggest that some additional analysis is needed for the county in home sales and building permits and median home prices. 

Overall, these numbers point to a soft market for refinances, and to small number of new home sales, in spite of continued growth in median home prices in all areas.