The National Association of Realtors was not surprised by the drop in U.S. home sales in May, coming after the surge in sales driven by the April deadline for the home buyer tax credit.
The Pending Home Sales Index, a forward-looking indicator, dropped 30.0% to 77.6 based on contracts signed in May from a reading of 110.9 in April, and is 15.9% below May 2009 when it was 92.3. The decline comes after three strong monthly gains.
The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
"Consumers are rational and they rushed to meet the tax credit eligibility deadline in April," said NAR chief economist Lawrence Yun. "The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June. Surprisingly, though, some local markets such as Portland, Maine, and Jacksonville, Florida, actually experienced an increase in contract signings from a year ago without the tax credit."
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