WASHINGTON - Sales of new homes nationwide 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 yesterday from the U.S. Commerce Department is the latest sign of a precarious housing market that is struggling to recover and could weaken the broader economic recovery in the United States.
It follows a disappointing report issued this week showing sales of previously occupied homes had dipped in May.
Analysts linked the sudden drop in new-home sales to the expiration of federal tax credits of up to $8,000.
But double-digit unemployment and slow job growth have also weighed on the market, even with mortgage rates at near-historic lows.
"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 to clients. "After all, unemployment remains high, job security is low, and credit conditions are tight."
The median sales price in May was $200,900. That was down 9.6 percent from a year earlier and down 1 percent from April.
The drop in new-home sales means fewer jobs in the construction industry, which normally powers economic recoveries but has remained lackluster this time.38.89037 -77.03196 Sales of new homes nationwide 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.