Loan demand to purchase homes in the US dropped to a 13-year low after the expiration of tax credit from the federal government, while near-record low mortgage rates stirred up refinancing, according to the Mortgage Bankers Association.
Home loan purchase applications fell 27.1 percent to the lowest level since May 1997, after homebuyer tax credits worth $8,000 coming from the federal government expired on April 30.
Request for home loan purchases have dropped to nearly 20 percent over the past month despite low cost borrowing.
"It’s disturbing," said John Canally, an economist from 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."
Overall, mortgage requests fell 1.5 percent on a seasonally adjusted basis last week, fuelled by a 14.5 percent increase in home loan refinancing applications after mortgage rates neared historic lows.