Obama stimulus plan at risk as house sales resume record slide
Published 24/06/2010 | 05:00
THE US property market threatens to undercut the Obama administration's stimulus-driven economic recovery as home sales resume their record slide following the end of a government homebuyer tax credit.
New house sales tumbled by 33pc last month to a record low annual pace of 300,000, the Commerce Department said in a report yesterday. Sales of second-hand houses unexpectedly fell 2.2pc in May, even as mortgage rates remained near an all-time low.
The end of the tax credit in April is putting a strain on a market still hurting from the worst housing collapse since the Great Depression.
Foreclosures may reach 1.9 million this year after a record two million in 2009, according to Mark Zandi, chief economist at Moody's Analytics.
It would take more than eight months to sell all available 3.89 million existing homes, the National Association of Realtors (estate agents) said.
"We're going to see a home-sales air pocket after the end of the tax-credit stimulus," said Richard DeKaser, a former economist at the US Bureau of Economic Analysis. "That means housing will be a drag on third-quarter economic growth."
"If there is a sharp decline, not only in housing sales but in housing prices, that could threaten a recovery," said Susan Wachter, a real estate professor at the University of Pennsylvania's Wharton School in Philadelphia.
The median US home price slid 29pc to an almost eight-year low of $164,600 (€134,000) in February, from a peak of $230,300 (€187,937) in July 2006.