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Home purchase contracts fall 30% in May with tax-credit expiration [Updated]

July 1, 2010 |  7:35 am

Purchase contracts for previously owned U.S. homes plunged 30% in May as the deadline to qualify for the popular home-buyer tax credit expired, according to an industry index.

The National Assn. of Realtors’ pending home sales index, a forward-looking indicator based on the number of purchase contracts signed in the U.S., dropped to 77.6 in May from 110.9 in April.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

The index is now 16% below May 2009 when the index stood at 92.

The falloff comes after three months of improvement as home buyers were motivated by a federal tax credit of as much as $8,000 to buy a home. To qualify for the credit, buyers had to have a purchase contract on a home by April 30.

[Updated at 8:17 a.m. Thursday: Congress late Wednesday night extended the deadline by three months]

The extension is only for those buyers who signed a purchase contract by April 30 and need extra time to close their deals. The deadline to close was Wednesday and the extension will push that deadline to Sept. 30. The incentive offers up to $8,000 for certain buyers.

-- Alejandro Lazo