New-home sales plunge

In a recent report issued by the Commerce Department, sales of new homes collapsed in May, dropping 33%.     As The Washington Post reports, economists anticipated a small decline following the expiration of the federal tax credits on April 30th- an incentive that offered first-time buyers an $8,000 credit and current homeowners who buy and move a credit up to $6,500. However, they did not foresee the expiration weighing so heavily on the housing market.

“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.

……Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.”

MACo reported on June 15th that Maryland is rebounding at a slower rate than the national average. For more information on Maryland’s housing market, click here.

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