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Sunday 27th of June 2010
June 24, 2010    

US new home sales plunge to record low in May

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by Kay Murchie
US new home sales plunge to record low in May

The Commerce Department has revealed a record fall in sales of new homes in the US for the month of May.

According to the Commerce Department, new single-family home sales fell by 32.7% on year to an all-time low of 300,000 units – the lowest since records commenced in 1963.

However, a fall was expected as buyers rushed to purchase homes in April to qualify for a Government tax incentive. However, the drop was not expected to be quite so severe.

The figures come just a day or so after the National Association of Realtors (NAR) revealed a surprise drop in sales of previously owned homes in the US for the month of May.

The NAR said sales fell 2.2% in May to an annual rate of 5.66 million units, up from a revised 5.79 million units in April.

US home sales have seen quite a boost this year due to low mortgage rates and two tax credits: up to $8,000 for new buyers and $6,500 for current owners who buy and move into another home.

To qualify for the tax credit, borrowers had to have a signed offer by 30 April and the deal must be finalised by 30 June.

Both sets of figures have raised concerns about the health of the US housing market and the expiration of the tax incentive is expected to see sales dwindle even further.

Paul Dales at Capital Economics comments: “We fear that the appetite to buy a home has disappeared alongside the tax credit.

“After all, unemployment remains high, job security is low and credit conditions are tight,” he added.

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