Big Bank Mortgage Results Hurt by Spring Real Estate Market

July 16, 2018 — 12:12 PM EDT

The impact of high property values and rising mortgage rates that shut some buyers out of the spring real estate market is starting to show up in the quarterly results of some of the nation's banks. Wells Fargo & Company (WFC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and The PNC Financial Services Group, Inc. (PNC) all reported second quarter results showing signs of weakness in mortgage originations.

Take Wells Fargo for starters. According to National Mortgage News, the national bank reported income of $770 million in its mortgage banking unit, which is down from $934 million in the first quarter and below the $1.1 billion the unit had in last year's second quarter. Mortgage originations at Wells Fargo came in at $50 billion in the second quarter, which National Mortgage News reported were up quarter over quarter but were down from $56 billion a year ago.

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JPMorgan, meanwhile, saw revenue dip to $1.35 billion from the first quarter in its mortgage unit, down from the close to $1.43 billion in mortgage revenue in the second quarter of 2017. Mortgage originations of $21.8 billion were up from $18.2 billion in the first quarter but were lower than the $26.2 billion in originations in last year's second quarter, noted the report. Net mortgage servicing revenue at JPMorgan was $231 million, which is off from $370 million from the first quarter and $249 million in last year's second quarter.

As for Citigroup, National Mortgage News said that revenue from the mortgage unit was $140 million in the second quarter, which was down 5% sequentially and 25% lower from a year ago. Meanwhile, non-interest income at PNC's residential mortgage unit was $84 million, compared with $97 million in the first quarter and $104 million from last year's second quarter, according to National Mortgage News. Mortgage originations at PNC were at $2 billion, up from $1.7 billion in the first quarter but lower than the $2.2 billion in originations lodged in the second quarter of 2017.

While rising mortgage rates have been shutting some homebuyers out of the market and preventing some homeowners from refinancing their mortgages, a bigger deterrent has been rising property values and a dearth of affordable properties for sale. For May, online real estate company Zillow found that home values appreciated just . The average home price stood at $216,000, although the property values are much higher in certain pockets of the country. For one example, according to Zillow, the median home value in San Jose, California, is $1.27 million, which is up close to 26% compared with May 2017. In Las Vegas, Zillow found that home values increased 15.5% year over year for May, and in Seattle, home values were up 12.2% in the same time frame.