New home sales have jumped nearly 50% over the past two month, thanks to the tax credit the government has offered first-time and repeat buyers.
The big question being asked is how much will the market drop off in the wake of the expiration of the tax credit.
The U.S. Mortgage Bankers Association’s Purchase Index is providing a few clues, and its initial take on the market is not encouraging, as the Purchase Index fell 3.3% in the latest week, which comes on top of a steep 27% decline in the prior week.
Currently, the Purchase Index is at the lowest level since April 1997, suggesting that home sales, both new and existing, are set to slump following the end of the government’s incentive.
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