WASHINGTON: Sales of existing homes in the US fell 2.2 per cent in May after two consecutive rises, an industry group said yesterday, despite support from a government tax incentive programme.
The National Association of Realtors (NAR) said that existing home sales dropped to an annual rate of 5.66 million units, from an upwardly revised surge of 5.79 million units in April.
Most analysts had expected sales to rise to 6.10 million units as homebuyers raced to close contracts under a federal tax incentive programme.
'Although the data can be volatile, the homebuyer tax credit seems to have run out of steam early,' said Ms Celia Chen at Moody's Economy.com. The report 'suggests that there may be greater fundamental weakness in housing demand than anticipated', she added.
The Dow Jones Industrial Average lost ground after the news but rose again. It was 30.15 points higher at 10,472.56 after two hours of trade.
Existing home sales last month were 19.2 per cent above their level in May last year as the housing sector slowly stabilises after the collapse of a real estate bubble caused a mortgage meltdown that sparked a global financial crisis in mid-2007.
'We are witnessing the ongoing effects of the homebuyer tax credit,' said Mr Lawrence Yun, NAR's chief economist.
The government reported last week that new housing construction in the United States slumped 10 per cent in May to its lowest level since October 2009.
NAR said it was supporting Senate amendments to extend the homebuyer tax credit closing deadline through Sept 30 and to renew a national flood insurance programme.
'Sales and related local economic activity would have been higher without delays in the closing process or flood insurance issues,' Mr Yun noted.
'The tax credit undoubtedly pulled into the spring transactions which would have taken place in the summer, so the next few months will be tough,' said Mr Ian Shepherdson, chief US economist at High Frequency Economics.
Source: Straits Times, 23 Jun 2010