Housing starts fall 10% in May
Construction of new homes took a 10% dive in May after the expiration of a popular federal tax credit for buyers, the Commerce Department said Wednesday.
It was the first drop in housing starts since February, when activity by U.S. builders began to pick up in anticipation of a busy spring fueled by the government incentives.
Those credits of as much as $8,000 for first-time buyers and $6,500 for some current homeowners expired April 30. The May slump in starts is an indication that housing is likely to weaken in coming months without the government stimulus — even though interest rates remain low, economists said.
“The plunge in housing starts in May underlines that a sustained housing rebound has yet to get underway,” said Nigel Gault, U.S. chief economist for the consulting firm IHS Global Insight. “Now [that] the credit is gone, it’s time for the payback.”
Builders began construction on housing units at a seasonally adjusted annual rate of 593,000, the Commerce Department said. That was 10% below the April rate but 7.8% above the May 2009 pace.
