U.S. home-buying loan demand falls for 4th week

By Lynn Adler

NEW YORK, June 2 (BestGrowthStock) – Demand for loans to buy U.S.
homes fell last week for the fourth straight week, holding
13-year lows, as the housing market adjusted to a selling
environment without the federal tax credits that had stoked
April sales, the Mortgage Bankers Association said on
Wednesday.

Home buying ran out of steam after eligible borrowers
sprinted to meet the April 30 deadline for up to $8,000 in tax
credits. The incentive pulled house sales forward and triggered
the largest monthly construction spending gain in nearly a
decade. [ID:nN01108942].

Total loan applications eked out a 0.9 percent rise in the
week ended May 28, seasonally adjusted, as a 2.4 percent in
refinancing demand offset a decline of 4.1 percent in purchase
loan requests to the lowest level since April 1997.

“Purchase applications are now almost 40 percent below
their level four weeks ago, while the refinance share, at 74
percent, is at its highest level since December,” Michael
Fratantoni, MBA’s vice president of research and economics,
said in a statement.

Average 30-year mortgage rates rose 0.03 percentage point
to 4.83 percent last week, but the low rate drove more
homeowners to apply for refinancing. The rate rose as high as
5.31 percent in early April before euro zone market troubles
triggered a flight to safety in U.S. Treasuries, driving down
their yields, which are used as a peg for mortgage rates.
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See related graphic at: http://link.reuters.com/hem67k
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A so-called “hangover” from more than a year of the tax
credits had been widely expected, and most economists expect
U.S. housing can stand on its own footing as the year
progresses. [ID:nN01125278].

“This volatility in activity is the price paid for higher
average levels of sales across the year as a whole than would
have occurred without the tax credit,” Ian Shepherdson, chief
U.S. economist at High Frequency Economics, wrote on Tuesday.

Buying a home, for qualified purchasers, remains affordable
with mortgage rates historically low and prices down about 30
percent on average from their peaks in 2006.

But at least in the weeks since the tax credits expired,
homeowners are concentrating on shaving costs by refinancing.

The MBA’s refinance applications index has risen for four
straight weeks to its highest level since October 2009.

Still, refinancing is also experiencing “burnout,” with
fewer people acting to refinance each time mortgage rates fall
near current levels, Fratantoni said in an interview.

The refi index, at roughly 3,300 last week, is well below
the most recent peak of about 7,400 in early January 2009 when
30-year mortgage rates were roughly similar. In 2003, when the
loan rate was just under 5 percent, the refinance index shot up
to about triple last week’s level.

“A lot of people would benefit from getting a lower rate
but they don’t have equity, they don’t have income, they don’t
have credit,” Fratantoni said. “You’re getting a response, but
it’s a fairly muted response.”

Stock Report
(Editing by Leslie Adler)

U.S. home-buying loan demand falls for 4th week