Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.
The bleak report from the Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation's housing market.
The credits expired April 30. That's when a new-home buyer would have had to sign a contract to qualify.
"We fear that the appetite to buy a home has disappeared alongside the tax credit," Paul Dales, U.S. economist with Capital Economics," wrote in a note. "After all, unemployment remains high, job security is low and credit conditions are tight."
Not to make this too political, but there have been many free market economists predicting that this exact event would happen for some time. They have been warning that housing may not have bottomed out yet and that the apparent recovery was just government stimulus in the form of tax credits, and that the house of cards would come crashing down when the tax credits expired, just like cash for clunkers did. Given that this US administration frequently calls on its critics to "listen to science" (global warming, etc), should they be called out and held accountable for ignoring good economic science? And is this also a sign that we ought to do an about face on our economic policy and return to capitalism?