UPDATE 1-US home loan demand up in tax credit’s last days

By Lynn Adler

NEW YORK, May 5 (BestGrowthStock) – Demand for loans to buy U.S.
homes raced to a seven-month high last week in the last hurrah
for federal homebuyer tax credits that ended April 30, Mortgage
Bankers Association (MBA) data showed on Wednesday.

Home purchase loan applications jumped 13 percent in the
week ended April 30 to the highest level since early October,
overshadowing a 2.1 percent drop in refinancing demand. Total
mortgage applications rose by a seasonally adjusted 4 percent,
the trade group reported.

It was the third straight weekly increase in purchase
applications, rising almost 24 percent in the month. The share
of loan refinancing fell to 51.9 percent of all applications,
the lowest since early July 2009, the MBA said.

Average 30-year mortgage rates dipped 0.06 percentage point
to 5.02 percent, the lowest rate since mid-March.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

See related graphic at http://link.reuters.com/myb72k

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Eligible borrowers seeking to take advantage of federal tax
credits of $8,000 for first-time buyers and $6,500 for existing
homeowners were required to sign contracts by last Friday and
to close on their loans by June 30.

The big question now is whether the U.S. housing market has
enough traction to continue recovering without government
help.

“The need for further stimulus is not so obvious anymore.
We don’t think it’s needed because we’ve gotten through the
thick of it and we’re at the point where markets will take care
of themselves,” said Mike Schenk, senior economist for the
Credit Union National Association in Madison, Wisconsin.

In addition to the tax credit, the Federal Reserve bought
more than $1.4 trillion mortgage-related securities intended to
keep mortgage rates down to revive the housing market. That
program ended on March 31.

“All the data that we’ve seen recently point to the fact
that consumers are in a better place today than they were six
months ago, and because of that they will likely be more active
in the housing market,” Schenk said. The difficult labor
market, however, will keep the housing recovery slow, he
added.

Housing demand is likely to drop off after the recent
flurry of sales ahead of the tax credit expiration, but then
mount a slow upturn, many industry experts expect.

Sales of new homes jumped almost 27 percent in March, and
sales of existing home increased by 6.8 percent. The number of
previously owned homes in contract to be sold, known as pending
home sales, rose 5.3 percent to a five-month high in March.

“The pending home sales index, based on initial contracts,
will likely be boosted again in April, with some payback
thereafter,” UBS economists wrote. “However, we believe the
combination of low prices, still relatively low mortgage rates
and the nascent recovery in employment will support home sales
later in the year.”

The latest unemployment figures will be reported on Friday.
April’s rate is seen holding at 9.7 percent for a fourth
straight month, based on a Reuters poll, after touching a more
than 26-year peak over 10 percent last year.

Homeowners have increasingly turned to the government for
their mortgages, including low down-payment products from the
Federal Housing Administration. More than one-half of all
purchase applications last week were for government loans, the
highest share in two decades, the MBA said.
Stocks

(Editing by Jeffrey Benkoe)

UPDATE 1-US home loan demand up in tax credit’s last days