UPDATE 1-Loan demand to buy US homes sinks to 13-year low

(Adds quotes, link to graphic, delinquencies)

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.

“It’s disturbing,” said John Canally, economist at LPL
Financial in Boston.

“It seems that every other data point for housing is pretty
good — high affordability, low interest rates, relatively low
inventory, home prices are up — so I’m leaning toward the
hangover from the tax credit but I’m going to need to see a
couple of more weeks of data.”

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See related graphic: http://link.reuters.com/naf25k

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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.

“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.

The MBA separately reported that total U.S. home loans that
are late paying or in foreclosure eased in the first quarter
but remained near record highs, largely because the country’sunemployment rate remains elevated.

One out of seven U.S. households with a mortgage ended the
first quarter late on payments or in the foreclosure process.
[ID:nNLLJGE642].

With the tax credits gone, home shoppers will take more
time to find the right property, said Marc Demetriou, branch
manager/mortgage consultant at Residential Home Funding Corp in
Bloomingdale, New Jersey.

“Unemployment is definitely still an issue and inventory is
still an issue, but it’s definitely a buyer’s market,” he said.
However, “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,

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 the near double-digit U.S. unemployment rate 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.

(Editing by Andrea Ricci)

UPDATE 1-Loan demand to buy US homes sinks to 13-year low