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WASHINGTON (AP) — 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 expiration of federal tax credits could affect 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. 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.
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.
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