Housing starts plunge 10% in May [Updated]
Construction of new homes took a 10% dive in May after the expiration of a popular federal tax credit for buyers.
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 up to $8,000 for first-time buyers and $6,500 for some current homeowners expired April 30. And 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 consultant 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.
-- Alejandro Lazo
[For the record: An earlier version of this post incorrectly stated that the drop in housing starts was the first drop since December.]