Sales of U.S. New Homes Plunge to Lowest Level on Record as Credit Expires

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Sales of U.S. New Homes Plunged to Record Low in May (Update2)
By Shobhana Chandra and Timothy R. Homan


June 23 (Bloomberg) -- Purchases of new homes in the U.S. fell in May to a record low as a tax credit expired, showing the market remains dependent on government support.

Sales collapsed a record 33 percent to an annual pace of 300,000 last month from April, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed today in Washington. Demand in prior months was revised down.

The end of a tax incentive worth as much as $8,000 means the market will now be dependent on gains in employment, which are needed to lift incomes, brace confidence and contain foreclosures. A lack of inflation and concern over jobs and housing are among reasons Federal Reserve policy makers may reiterate a pledge to keep interest rates near zero.

“We see no chance of a quick, sustained recovery, though we are hopeful there is little further downside” Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York, said in a note to clients. “The next few months are likely to be very grim.” Shepherdson correctly forecast the drop in sales. ..........(more)

The complete piece is at: http://noir.bloomberg.com/apps/news?pid=20601087&sid=aFryYpgGDKpY&pos=1