For the fifth week in a row home loan applications have declined in the US, showing signs of the effect the federal tax credit had on the housing market. According to this story from Reuters.com loan applications dropped to the lowest levels since 1997.
Demand for loans to purchase houses fell 5.7 percent in the week ended June 4 to the lowest level since February 1997, even after adjusting to account for the Memorial Day holiday.
Home buyers have been on hiatus since many rushed to sign purchase contracts ahead of the April 30 deadline for up to $8,000 in federal tax credits.
"It's very worrying," said Paul Dales, U.S. economist at Capital Economics in Toronto, said of the degree of payback from more than a year of federal buyer tax incentives.
"We have to face the unfortunate fact that the housing market really isn't out of the woods yet," he added. "At a time when the economic recovery is still looking fairly fragile it won't be a good thing if people are moving less and spending less on buying new durable goods like fridges and sofas."
