WASHINGTON - Americans showed far less appetite to buy new homes last month after the government stopped offering a homebuyer tax credit. The news signaled a renewed housing slump that threatens the broader economy.
Sales of new homes nationally fell in May to their lowest level on record, plunging 33 percent from the month before. The bleak data followed a report earlier this week that sales of existing homes dipped, too.
Newsday reported earlier this month that Long Island's 1,323 contracts signed in May on all kinds of homes was a 58.6 percent drop from April, steeper than some brokers expected from the expiration tax credit, according to numbers from the Multiple Listing Service. The May figure was also a 34 percent drop from a year ago.
The Federal Reserve, mindful of the fragility of the housing market, struck a more cautious tone Wednesday in its read on the economy. It said only that the recovery is "proceeding." It had said the rebound was strengthening.
The Fed repeated its pledge to hold interest rates at record lows to fuel growth. That has helped keep mortgage rates down, but even ultralow rates couldn't overcome the chilling effect on new-home sales caused by the end of the tax credits. The government offered up to $8,000 to buyers who signed a contract by April 30.
New-home sales for May came in at a seasonally adjusted annual sales pace of 300,000, the Commerce Department said.
- AP and Newsday staff report