The recovery in the housing sector has stalled with the April 30 expiration of the federal homebuyer tax credit and now the market is "going into reverse," according to IHS Global Insight chief economist Nigel Gault.
"The setback for housing after the expiration of the homebuyer's tax credit is proving severe," the chief economist said in a new report. New home sales plunged 32% in May and sales of single-family existing homes fell 1.6%.
"Existing home sales are still being propped by contract signings [in March and April]—they too will tumble by July," Gault said in his forecast update.
IHS Global Insight economists expect economic growth to slow in the second half of this year and the housing market will get "little help" from the weak labor market.
"We now believe that housing recovery will be a longer drawn-out process than in our previous forecasts," the chief economist said.
