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WORLD> America
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US mortgage applications slump to 8-year low
(Agencies)
Updated: 2009-02-11 21:58 NEW YORK -- Demand for US mortgage applications tumbled nearly 25 percent last week, with requests for loans to buy homes sinking to an eight-year low, the Mortgage Bankers Association said on Wednesday, as potential buyers hold out for better terms and government help.
The Mortgage Bankers Association's seasonally adjusted home purchase applications index slid 9.8 percent in the week ended February 6 to 235.9, its lowest level since the end of 2000.
The rate has fallen more than a full percentage point in three months, but is up about 3/8 point from early this year and seen heading lower. "In addition to waiting for the rate, you have home prices continuing to come down, so why would I pay $200,000 today when I can pay maybe $180,000 in a couple months or even $150,000," Daniel Penrod, industry analyst for the California Credit Union League in Rancho Cucamonga, California, said on Tuesday. The government is "really pushing against some very strong forces." US Treasury chief Timothy Geithner on Tuesday proposed pumping $2 trillion into the banking system to sop up bad assets, restore credit and revive lending at lower mortgage rates. Expectations that government steps could yank 30-year home loan rates near 4 percent, a proposed $15,000 home-buying tax credit and the outlook for still lower house prices has raised the incentive to wait. Home prices through November tumbled at least 25 percent from their mid-2006 peak, according to Standard & Poor's/Case-Shiller Home Price indexes. The descent should persist, with a record number of foreclosed properties dragging down market values, analysts have said. The Mortgage Bankers Association's loan refinancing gauge tumbled 30.3 percent to 2,722.7 last week, its lowest level since the November 21 week and a far cry from the 7,414.1 reached in January when 30-year mortgage rates fell to 4.89 percent. Intensified government actions will help, Penrod said, but the needed elixirs are more bank lending and a more stable employment picture. "There's no urgency to jump in until prices settle," Penrod said. "Given the current state of unemployment and the projections there is still downward movement coming in the first half of the year for non-foreclosure sales and prices." US employers slashed nearly 600,000 jobs in January, the biggest monthly cuts in 34 years, while the unemployment rate set a 16-year peak. The $15,000 home buyer tax credit that is part of the economic stimulus program adopted by the US Senate would create nearly 500,000 home sales and add 255,000 jobs in the coming year, according to the National Association of Home Builders. Analysts had also been predicting that at least a third of home owners applying to cut costs by refinancing would be turned down because of more rigid lending standards, job loss or because their home values have fallen below the size of existing mortgages. Borrowers with mortgages that surpass their appraised home price are called "under water," or "upside down." "Even with the proposed tax break and the rates dropping way down, it unfortunately doesn't change the water level for those drowning in their home debt," Penrod said. |
