Home Lending in Fayette County Neighborhoods
This report focuses on Fayette County, Kentucky, home to the city of Lexington. It first takes a broad look at application and origination activity during the past 27 years (1990–2016) and then delves into trends over the 13-year period from 2004 to 2016. Using maps and a series of figures and tables, we tell the story of mortgage lending during these periods from both the neighborhood and borrower perspectives.
- Loan application and origination activity peaked in 2003 but plummeted as the Great Recession set in. By 2008, application and origination activity dropped by 60 percent (more than 15,000) and 66 percent (nearly 13,000), respectively.
- Prior to 2008, loan application rates per 1,000 housing units were fairly similar across all neighborhood income groups (high-, middle-, moderate-, and low-income). After 2008, loan application rates began diverging; middle- and high-income neighborhoods saw more erratic changes primarily driven by refinance activity, while application rates in low- and moderate-income (LMI) neighborhoods remained depressed, with slight upticks in 2012 and 2016.
- Following a sharp jump of 12 percentage points on average across all neighborhood income groups in 2009, origination rates continued increasing through 2016. These increases ranged from 3 percentage points in high-income neighborhoods to 13 percentage points in low-income neighborhoods.
- When compared to the nation, Fayette County’s origination rates were higher across all neighborhood income groups and years.
- Homeowners living in high-income neighborhoods were increasingly able to take advantage of lower interest rates and refinance their homes. From 2006 to 2010, the share of refinance activity in those neighborhoods increased 18 percentage points. In 2016, the share of refinances occurring in high-income neighborhoods remained at 52 percent.
- The rate of home purchase loans per 1,000 households declined for all race and income groups following the Great Recession (2005 versus 2010), but for black borrowers, the decline was steeper, and their recovery has been weaker.
- Looking at how home purchase rates differ by race in another way, we find that while black people account for 15 percent of Fayette County’s population in 2016, black borrowers account for only 5 percent of the home purchases. Conversely, white people account for 78 percent of the county’s population, but white borrowers account for more than 82 percent of all home purchases.
The views expressed in this report are those of the author(s) and are not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System.