U.S. existing-home sales plummet

Sales of previously occupied homes in the U.S. took their biggest monthly drop in more than 40 years last month, the National Association of Realtors said Monday.

The drop came despite a move by Congress to extend the time for homebuyers to use a tax credit.

The credit of up to $8,000 for first-time homebuyers had been due to expireNov. 30, but legislatorsextended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.

The latest numbers suggest that, despite the extension, a scramble to qualify for the credit ended abruptly.

"It's 'exit stage left' for first-time homebuyers," wrote Guy LeBas, an analyst with Janney Montgomery Scott.

Sales in December fell 16.7 per cent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the Washington-based association said. Many economists had been expecting a drop of about 10 per cent.

The report "places a large question mark over whether the recovery can be sustained when the extended tax credit expires," wrote Paul Dales, a U.S. economist with Capital Economics.

The big question hanging over the housing market this spring is whether a tentative recovery will stumble after the government pulls back support. The Federal Reserve's $1.25-trillion-US program to push down mortgage rates is scheduled to expire at the end of March a month before the newly extended tax credit runs out.

Last year, first-time buyers were the main driver of the housing market, but their presence is on the decline. They accounted for 43 per cent of purchases in December, down from about half in November, the Realtors group said.