WASHINGTON (AP) — Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit.
The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.
“It’s ‘exit stage left’ for first-time homebuyers,” wrote Guy LeBas, an analyst with Janney Montgomery Scott.
December’s sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said Monday. Sales had been expected to fall by about 10 percent, according to economists surveyed by Thomson Reuters.
The report “places a large question mark over whether the recovery can be sustained when the extended tax credit expires,” wrote Paul Dales, U.S. economist with Capital Economics.