The nation’s third and fourth most populous cities, Chicago and Houston, are similar in population (both between two and three million) and in the dollar volume of mortgages made in them in 2015 (Chicago $17.8 billion, Houston $17.1 billion, purchased mortgages not included). But there were many fewer loans made in Chicago, suggesting the average loan size there was bigger.
And by checking LendingPatterns™, that turns out to be the case. In Houston, which had 69,000 mortgages extended in 2015, average loan size on a first lien mortgage was $259,000, and $80,000 for a subordinate lien. In Chicago, with 51,000 loans, average first lien was $353,000 and average subordinate lien was $106,000.
That disparity would make you think Chicago had more jumbo mortgages made than in Houston. In the Second City (the third nowadays, behind New York and Los Angeles), 16 percent of mortgages in 2015 were jumbos, while in Houston there were just seven percent jumbos.
Loans in both cities tended to be sold to the secondary market. Just 22 percent of mortgages made in Houston stayed on lender portfolios, while in Chicago that number was 28 percent.
Non-agency investors led the buyers of loans in both cities. In Houston, 30 percent of sales went to non-agency investors, while in Chicago the percentage was slightly lower, at 28 percent. Fannie Mae led GSE investors in Houston with 23 percent of volume, while in Chicago Fannie at 19 percent was edged out by Freddie Mac, at 20 percent.
Looking at loans by race and ethnicity, Houston had a significantly higher percentage of loans made to minorities in 2015. Whites had less than half the market share, at 48 percent, with minorities taking 40.2 percent of volume. In the Texas city, Hispanics had half the minority share, at 20 percent.
In Chicago, whites had 58 percent of mortgages made there that year. Minority total was nearly 30 percent, with Hispanics being the largest minority group at 13 percent.
Houston had a bigger share in the government market. Conventional loans made up 76 percent of volume there, with the Federal Housing Administration getting the biggest share of the guvvies, at 19 percent. Chicago had nearly 87 percent in conventional finance, with FHA also leading the guvvies there at 12 percent.
Houston tilted more toward purchase mortgages, with six of ten of its mortgages going towards buying houses and 35 percent for refinancing. In Chicago the two categories were very even, at 49 percent purchase money and 48 percent refis. (The balance in both cities went for home improvement loans.)
Not much multifamily or manufactured housing lending went on in Houston, which had more than 99 percent of its volume in one-to-four unit homes. Chicago showed a slightly larger appetite for multifamily loans, at two percent.
More than half of the loans in each market went to upper income buyers, 55 percent in Houston and 52 percent in Chicago. Chicago had nearly 20 percent of mortgages in the combined low and moderate income categories, while Houston had slightly less at 18 percent.
(Mark Fogarty is a journalist and analyst who has been covering the mortgage industry for more than 30 years.)