Loan demand to buy US homes sinks post tax credit

By Lynn Adler

NEW YORK, May 19 (BestGrowthStock) – Demand for loans to buy U.S.
homes shriveled to a 13-year low last week, following the
expiration of federal tax credits, while near-record low
mortgage rates stoked refinancing, the Mortgage Bankers
Association said on Wednesday.

Mortgage purchase applications sank 27.1 percent to the
lowest level since May 1997 in the absence of the popular
government support, the group said. U.S. housing groped for
footing after more than a year of homebuyer tax credits worth
up to $8,000 expired on April 30.

Requests for home purchase loans have fallen almost 20
percent over the past month despite low borrowing costs.

“The data continue to suggest that the tax credit pulled
sales into April at the expense of the remainder of the spring
buying season,” Michael Fratantoni, the industry group’s vice
president of research and economics, said in a statement.

Overall loan requests were down 1.5 percent, on a
seasonally adjusted basis, in the week ended May 14, cushioned
by a 14.5 percent jump in mortgage refinancing applications as
home loan rates neared historic lows.

Average 30-year mortgage rates fell 0.13 percentage point
last week to 4.83 percent, the lowest since last November, the
MBA said. The record low was 4.61 percent in March 2009, based
on the group’s survey, which has been conducted since 1990.

Refinancing applications jumped to a nine-week high and
accounted for about 68 percent of all applications last week.
But buyers took a low profile after rushing en masse to take
advantage of the tax incentive.

“People that were serious about buying worked very hard and
spent a lot of time and effort to find the right house to get
in for April 30,” when the tax credit expired, said Marc
Demetriou, branch manager/mortgage consultant Residential Home
Funding Corp. in Bloomingdale, New Jersey.

“You’re going to see a trail-off now” in purchase demand,
he said.

U.S. borrowers have gotten a hand from Europe, on worry
that roughly $1 trillion in emergency funding might not be
enough to stabilize euro zone debt markets. Investors have fled
for the safest securities, slicing the U.S. Treasury yields
that are used as a peg for mortgage rates.

Low borrowing costs and stabilizing home prices are being
offset by near double-digit U.S. unemployment and a looming
supply of foreclosed properties yet to hit the market. The
worst of the housing crisis is over but recovery will be long
and slow, most economists agree.

With the tax credits gone, home shoppers will take more
time to find the right property, said Demetriou. “Unemployment
is definitely still an issue and inventory is still an issue,
but it’s definitely a buyer’s market.”
Stock Market Money

(Editing by Leslie Adler)

Loan demand to buy US homes sinks post tax credit