Updated from 7:57 a.m with JPMorgan results
It doesn't look like higher mortgage rates, which came about following Donald Trump's presidential election win in November and the Federal Reserve's rate hike in December, totally ruined the appetites of people looking to purchase homes in the fourth quarter.
Bank of America (BAC - Get Report) reported Friday that total mortgage production volume -- which includes a person's first mortgage and home-equity origination -- surged 29% from a year ago to $21.9 billion in the fourth quarter ended Dec. 31. JPMorgan Chase (JPM - Get Report) said mortgage banking revenue was relatively unchanged in the quarter at $1.7 billion.
That may be music to the ears of traders in names tethered to the U.S. housing market such as home-improvement retailer Home Depot (HD - Get Report) and luxury builder Toll Brothers (TOL - Get Report) , whose shares have underperformed the broader market over the past month due to fears on the impact of surging interest rates.
However, any enthusiasm on the health of housing may be short-lived. As TheStreet's senior banking editor James Langford pointed out on our news desk this morning, Bank of America's mortgage production pipeline plunged 43% sequentially in the fourth quarter.
"Rates went up in the quarter, so the pipeline for the new mortgages in the first quarter and the first part of the year, is down," CFO Paul Donofrio said. "It's just a function of interest rates." Meanwhile, JPMorgan's mortgage banking revenue tanked 9.8% sequentially to $1.7 billion.
Those are huge clues that as higher interest rates have made it more expensive to buy a home, people are reconsidering whether they can handle the debt load. In turn, that could be future bad news for any number of companies tied to the U.S. housing market, from the aforementioned Home Depot to tool maker Stanley Black & Decker (SWK - Get Report) .
The total volume of one- to four-family mortgage loan originations is expected to reach $352 billion in the first quarter, the Mortgage Bankers Association recently said. In November, the MBA had predicted originations would amount to $365 billion. For the full year, the MBA now predicts $1.571 billion in loan origination volume, down from a $1.584 billion forecast made in November.