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Report: National home sales plunged steeply in December

LOS ANGELES - Sales of previously owned homes nationwide plunged steeply in December, raising concerns that the housing recovery could lose steam after government policies intended to support it expire in the spring.

U.S. sales in December fell to a seasonally adjusted annual rate of 5.45 million units, down 16.7 percent from November, the National Association of Realtors said Monday.

It was the biggest drop in the 42 years that the group has been measuring home sales and may be partly because many home buyers raced to close on their purchases before a federal tax credit of up to $8,000 for first-time purchasers was set to expire Nov. 30.

Congress in early November extended the deadline until April 30 and expanded the credit to include up to $6,500 for some buyers who already own homes.

The renewal didn't pull in as many buyers in December, with the number of first-time purchasers declining to 43 percent of all buyers in December from 51 percent in November, according to a survey by the Realtors group.

A slew of federal policies - including the tax incentives for buyers, low interest rates driven down by Federal Reserve actions and increased access to mortgages backed by the Federal Housing Administration - bolstered the nation's housing recovery last year.

But those props eventually will end: The tax credits expire in April, many economists expect interest rates to rise again later this year, and the FHA is tightening its lending standards. The question remains whether home sales and prices will fall without the government's help.

Lawrence Yun, chief economist of the Realtors association, said home sales were likely to pick up again in April as the new deadline approaches, but the outlook beyond that was unclear as a potential new wave of foreclosures and unemployment could stymie any recovery.

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