Contracts for pending sales of previously owned homes plungeda record 30 percent in May, far more than expected, after a popular tax credit expired at the end of the prior month, a survey from the National Association of Realtors showed Thursday.
The Realtors said its Pending Home Sales Index, based on contracts signed in May, fell to a record low 77.6 from 110.9 in April. Economists polled by Reuters had expected a smaller decline of 12.5 percent in May.
"Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June," said NAR chief economist Lawrence Yun.
First-time home buyers who had signed a contract before the end of April are eligible to receive $8,000 from the government. Buyers who are selling a home and buying a new home are eligible for $6,500.
The index is 15.9 percent lower than May 2009 and fell sharply in all regions of the country.
Contracts fell 33.3 percent in the South, the country's largest region, and dropped 20.9 percent in the West. Contracts dropped 31.6 percent in the Northeast and fell 32.1 percent in the Midwest.
Meanwhile, U.S construction spending slid less than expected in May as declines in private-sector building overshadowed gains in public-funded construction, a government report showed Thursday.
Construction outlays fell 0.2 percent in the month to an annual rate of $841.9 billion, the Commerce Department said.
Analysts polled by Reuters were expecting a 0.8 percent drop. Private residential construction fell 0.4 percent after two months of gains, underscoring the setback to housing markets from the expiration of a popular tax credit.