U.S. mortgage demand off before Obama rescue details

NEW YORK (Reuters) - Applications for loans to buy U.S. homes and to refinance existing mortgages fell for the second straight week, the Mortgage Bankers Association said on Wednesday, as consumers awaited for specific details on President Barack Obama’s housing stimulus plan.

The $275 billion program announced two weeks ago aims to reduce mortgage rates and stem the record tide of foreclosures that has dragged home prices down nearly 27 percent from their mid-2006 peak.

The Mortgage Bankers Association’s seasonally adjusted mortgage applications index, made up of both purchase and refinance loans, fell 12.6 percent to 649.7 last week.

That was about half the level posted early this year, when average 30-year mortgage rates fell as low as 4.89 percent, according to the trade group. Mortgage rates rose to 5.14 percent last week from 5.07 percent the prior week.

Potential buyers and refinancers have pulled back in the hopes that Obama’s Homeowner Affordability and Stability Plan will cut borrowing costs and steady house prices.

“The housing stimulus package was announced but without sufficient detail to cause the market to have comfort that it would work, and (a sense about) when it would work,” Michael Feder, chief executive at real estate data and analytics company Radar Logic, told Reuters on Tuesday.

The Mortgage Bankers Association’s seasonally adjusted refinancing applications index slumped 15.3 percent to 3,063.4, less than half the level seen as recently as mid-January.

Its purchase index dropped 5.6 percent to 236.4 last week, having steadily descended from this year’s high of 344.2 in the week ended January 2.

An unwillingness to buy a fast-depreciating asset, a supply glut and swiftly evaporating jobs continue to contribute to the housing market swoon, analysts agree.

“While there is some demand from bargain hunters, housing conditions remain quite dire,” Barclays economist Michelle Meyer wrote on Tuesday after the January National Association of Realtors pending home sales index slid to its lowest level since the index was started in 2001.

“Consumers have lost confidence in the economy and are worried about job security, discouraging big-ticket purchases,” and tight credit conditions are overshadowing relatively low mortgage rates, she added.

Editing by Leslie Adler