US home loan demand slumps to lowest in 3 months

By Julie Haviv

NEW YORK, April 14 (BestGrowthStock) – U.S. mortgage applications
fell for a second straight week, with a slump in demand for
government loans driving activity to its lowest level in three
months, data from an industry group showed on Wednesday.

Demand for home loan refinancing and purchase loans, a
tentative early indicator of home sales, both slid, indicative
of a housing market that remains highly vulnerable to setbacks
just weeks away from the expiration of federal home buyer tax

The Mortgage Bankers Association said its seasonally
adjusted index of mortgage applications (USMGM=ECI: ), which
includes both purchase and refinance loans, for the week ended
April 9, decreased 9.6 percent, reaching its lowest level since
the week ended Jan. 1.

The four-week moving average of mortgage applications,
which smooths the volatile weekly figures, was down 6.2

“Applications for government mortgages dropped
substantially last week, following the implementation of an
increase in FHA mortgage insurance premiums,” Mike Fratantoni,
the MBA’s vice president of research and economics.

The MBA’s seasonally adjusted purchase index (USMGPI=ECI: )
decreased 10.5 percent. The decline in purchase applications
was driven by government purchase applications, which decreased
19.1 percent from last week, compared to a decrease of 2.0
percent in conventional purchase applications.

The seasonally adjusted index of refinancing applications
(USMGR=ECI: ) decreased 9.0 percent, continuing a recent trend
brought on by a spike in mortgage rates.

Patrick Lashinsky, president and CEO of real estate
brokerage ZipRealty, based in Emeryville, California, said
sales activity is not as strong as late last year when
first-tome home buyers came out in droves to take advantage of
a tax credit, which was originally set to end Nov. 30.

“The extension and expansion of tax credits has not made a
significant impact this time around,” he said.

The federal government’s $8,000 first-time home buyer tax
credit and a $6,500 credit for home owners buying a new
residence will soon expire. Eligible borrowers must sign
contracts by April 30 and close loans by June 30.

“We are bouncing around a housing market bottom right now
and we will probably see a very slow recovery,” he said. “Sales
should pick up, however, because people have become more
comfortable with where home prices are headed and their job

The MBA said borrowing costs on 30-year fixed-rate
mortgages, excluding fees, averaged 5.17 percent, down 0.14
percentage point from the previous week. Interest rates were
also above the year-ago level of 4.70 percent.

An all-time low of 4.61 percent was set in the week ended
March 27, 2009. The survey has been conducted weekly since

The MBA said fixed 15-year mortgage rates averaged 4.45
percent, down from 4.54 percent the previous week. Rates on
one-year ARMs decreased to 7.02 percent from 7.03 percent.

“The 30-year fixed-rate mortgage should jump to around 6
percent within the next 12 months,” Lashinsky said.

“By 2011, the housing market should enjoy consistent, but
slow growth,” he said.

Recent data on new and existing home sales point to a
sector that is still struggling.

Sales of newly built U.S. single-family homes fell for a
fourth straight month to a record low in February, according to
the Commerce Department. Meanwhile, the National Association of
Realtors said sales of previously owned homes fell for a third
straight month in February.

More key insight into the state of the U.S. housing market
will emerge this week. The National Association of Home
Builders Thursday afternoon releases its NAHB/Wells Fargo
Housing Market Index. The Commerce Department on Friday
releases March housing starts data.

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US home loan demand slumps to lowest in 3 months