Housing Crash Redux?

[marmar]

Housing market struggles without government aid
By ALAN ZIBEL (AP) – 3 hours ago


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 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.

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 previously said the rebound was strengthening.

The Fed repeated its pledge to hold interest rates at record lows to fuel economic growth. That has helped keep mortgage rates down, but even ultra-low 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 qualify, buyers had to sign a contract by April 30.

"We all knew there would be a housing hangover from the expiration of the tax credit," wrote Mike Larson, real estate and interest rate analyst at Weiss Research. "But this decline takes your breath away." .........(more)

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