Spokane7
50°
June 23, 2010 in Business
New-home sales plunge 33% with tax credits gone
WASHINGTON — Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.
The bleak report from the Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation’s housing market.
The credits expired April 30. That’s when a new-home buyer would have had to sign a contract to qualify.
“We fear that the appetite to buy a home has disappeared alongside the tax credit,” Paul Dales, U.S. economist with Capital Economics,” wrote in a note. “After all, unemployment remains high, job security is low and credit conditions are tight.”
New-home sales in May fell from April to a seasonally adjusted annual sales pace of 300,000, the government said Wednesday. That was the slowest sales pace on records dating back to 1963. And it’s the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.
Analysts were startled by the depth of the sales drop.
“We all knew there would be a housing hangover from the expiration of the tax credit,” wrote Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.”
Economists surveyed by Thomson Reuters had expected a May sales pace of 410,000. April’s sales pace was revised downward to 446,000.
The government offered an $8,000 credit for first-time buyers. Current homeowners who buy and move into another property could receive up to $6,500.
New-home sales fell nationwide from April’s levels. They dropped 53 percent from a month earlier in the West and 33 percent in the Northeast. Sales in the South dropped 25 percent. The Midwest posted a 24 percent decline.
Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale in March fell 0.5 percent to 213,000, the lowest level in nearly 40 years. But due to the sluggish sales pace in May, it would still take 8.5 months to exhaust that supply, above a healthy level of about six months.
The median sales price in May was $200,900. That was down 9.6 percent from a year earlier and down 1 percent from April.
New-homes sales made up about 7 percent of the housing market last year. That’s down from about 15 percent before the bust.
The drop in new-home sales means fewer jobs in the construction industry, which normally powers economic recoveries but has remained lackluster this time.
Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders. The impact is felt across multiple industries, from makers of faucets and dishwashers to lumber yards.
© Copyright 2010 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Northwest wheat 
Scoutster on June 23 at 8:39 a.m.
A year from now we’ll be saying “How did we get here?”.
This is how.
Ninch on June 23 at 9:02 a.m.
Note that the housing credits that benefited a few were put on the back of taxpayers who too many are struggling. And if potential buyers cannot afford to buy homes without the credits, then maybe they should not be doing so. In fact, there are reports that some early housing credit buyers are starting to go into foreclosure already.
Because of the housing bubble, there is now a glut of new homes on the market and some are recommending demolition of whole unoccupied subdivisions that were built in the exurbs which have no local businesses and require long commutes.
Ninch on June 23 at 9:05 a.m.
BTW: I flagged spokanada’s comment because of his/her use of a derogratory profane term used against others (and by Obama himself) who do not agree with Obama’s policies.
Marksman on June 23 at 9:21 a.m.
Only a Canadian could see a 33% drop in sales as a success!
spokanada on June 23 at 9:29 a.m.
Teabaggers is profane??? SR please tell me it isn’t so?
spokanada on June 23 at 9:47 a.m.
Marksman, you dont think the tax credit was a success?
Coffee on June 23 at 10:17 a.m.
(slang, vulgar) A person who practices teabagging, the insertion of the scrotum into a partner’s mouth.
# (neologism) An affiliate of the Tea Party, or a supporter of its protests
“As a reference to members of the currently active Tea Party, the word has been used in speech and print by both liberals and conservatives. In this context, the term “teabagger” is a reasonably conceived informal name for an affiliate of the Tea Party, and as a word in the news, it earned a mention for the year 2009.” — “‘Teabagger’ Finalist For Oxford’s ‘Word Of The Year’”, Huffington Post, 18 Nov 2009.
All in how you use the word. Sorta like gay, when I was a kid meant carefree and happy, then homosexual and now “that’s stupid or rubbish”. Things change only death and taxes are immortal.
spokanada on June 23 at 10:45 a.m.
I’m surprised that Ninch and the SR thought I was using it to describe a sexual position.
liarsinnews on June 23 at 2:44 p.m.
The $8,000. tax credit was doomed to fail. When are the stupid fools in DC going to realize you can`t just throw money at it and expect to cure the moronic logic.
Diana on June 23 at 3:58 p.m.
I know! I was wondering the same thing during the first Bush TARP bailout in 2008!
misjustice on June 24 at 9:38 a.m.
Teagaggers are so sensitive, and perverted! I never knew that there was a sexual connotation to Teabagging! Thanks for that visual, coffee…so how is your sexually descriptive post allowed to stand, and spokanada’s was pulled? I’m not suggesting that you should be censored, I’m just curious… S-R???
As to the article…seems as if everyone was on the gravy train in the years prior to the collapse of the housing market. Builders over built, banks over lent, consumers over reached, all in the attempt to gain some version of the ‘American Dream’.
Many in the disappearing middle class used their homes as ATMs, taking out lines of credit, in order to finance a lifestyle they otherwise could not afford. Many mortgage bankers didn’t really care about underwriting good loans as they got their fees up front and then sold the paper. Many builders gambled also, speculation ran rampant in the years prior to the crash…and so it goes.
eagleproducer on June 24 at 10:02 a.m.
Don’t you just love the notion of private property where the propertyless see their schools crumble so more money can be funneled to the housing market? Mortgages are one of the biggest scams ever and people who take one out are suckers.
eagleproducer on June 24 at 10:05 a.m.
BTW: Squatting has never looked soooooooooo good!
I’m serious folks, that would be a great way to show our appreciation for the banking/mortgage sector for ruining our economy.
Coffee on June 24 at 12:48 p.m.
Just a guess misjustice, but maybe because it was an educational post. Also you comment on the article is spot on.