The federal government reported that new home construction fell sharply in May, the first month after the federal homebuyer tax credit expired.
“No doubt, a certain amount of building and buying activity that would have taken place in May was pulled forward to accommodate the [tax-credit] program’s end date, which is why we have projected some softening of the numbers,” David Crowe of the National Association of Home Builders, told The Philadelphia Inquirer.
Housing starts fell 10 percent from April to 593,000 last month, officials from the Department of Commerce reported June 16. That number falls in stark contrast to the predicted 655,000 home starts economists expected to see.
“The plunge in housing starts in May underlines that a sustained housing rebound has yet to get under way,” economist Nigel Gault of IHS Global Insight Inc. of Lexington, Mass, told the Inquirer. “The improvement in starts through April was driven by the extended tax credit, which expired April 30. Now, the credit is gone.”
Though the news is a sign that the U.S. economy still has a long road to recovery, it still shows how far it has come in just a year: new home starts are up 7.8 percent from May 2009.
An amendment proposed in the Senate by Majority Leader Harry Reid (D-Nev), Sen. Johnny Isakson (R-Ga.) and Sen. Chris Dodd (D-Conn.) would extend the homebuyer tax credit to Sep. 30. The credit was previously extended from November to April 30. The amendment is part of a jobs and tax bill which needs to be voted on by both chambers of Congress.