WASHINGTON — Pending home sales in May dropped sharply after three consecutive months of sales buoyed by the homebuyer tax credit.
The National Association of Realtors released the monthly indicator Thursday, which dropped 30.0 percent month-on-month to 77.6. From the same month last year, the figure declined almost 16 percent.
The forward-looking indicator tracks signed contracts to be completed in a month or two. A reading of 100 is equal to the average sales activity in 2001, when the index started.
“Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result,” said Lawrence Yun, the trade association’s chief economist.
The government has been doling out more than $21 billion to almost 3 million taxpayers. First-time homebuyers qualified for a tax credit of up to $8,000; current owners who moved to another home could get up to $6,500.
Based on the initial deadline, taxpayers had to sign contracts by the end of April and complete the payment by June 30. Wednesday, however, Congress extended the date to Sept. 30 to those who have already signed contracts.
Walter Molony, a spokesman for the National Association of Realtors,said the new deadline will prevent sales from declining further in June. As many as 180,000 homebuyers who signed contracts by the end of April failed to meet the transaction deadline. As for a longer-term outlook, Molony expects fluctuation in sales throughout the year.
“If we have the job creation that’s expected, we’ll see an increase in home sales later this year,” said Molony. “But before that, sales will likely drop in July and August.”