New Home Construction Fell When Tax Credit Expired

photo credit: J. Stephen Conn

New construction saw its lowest levels during May 2010 due to the home buyers tax credit expiration. In only one short month new residential construction fell 10% and building permits fell 5.9% according to the Commerce Department. Home buyers flocked to take advantage of the tax credit, but it dropped off and new home construction fell when the tax credit expired.

According to Nigel Gault, economist with IHS Global Insight in Lexington, Mass, the housing rebound has yet to get underway. "The improvement in starts through April was driven by the extended tax credit, which expired April 30. Now, the credit is gone."

Currently, the market has a surplus of homes even with low interest rates, 30 year mortgage rates under 5%, and a decline of prices, but because of the expiration of the tax credits new building has dramatically fallen. "It will take more than government incentives for the market to get back to normal," states economist Joel L. Naroff, of Naroff Economic Advisers in Holland, Pa.

Of course its employment that underlines the problems in the housing market. Chief economist Mark Zandi at Economy.com said the second half of this year will show gradual improvement in employment, which will help the housing situation.

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Posted on June 18, 2010 10:32:58 by Blog Author