Nationwide housing starts and issuance of building permits nose dive in May following the expiration of the home buyer tax credit program, according to new data released by the U.S. Commerce Department.

New-home production declined a whopping 10 percent to a seasonally adjusted annual rate of 593,000 units, the slowest pace since December 2009. Permit issuance slowed 5.9 percent to a rate of 574,000 units, its slowest pace since May 2009. Market analysts anticipated some declines in housing stats, as a homebuyers’ tax credit which had been in effect in the U.S. since 2008 expired on April 30, but these numbers fell far short of expectations.

The reaction of the National Association of Home Builders to its member builders was to try to put an upbeat spin on the data, but left no doubt that the near term prospects for home construction is still very uncertain:

“Not surprisingly, builders tapped the breaks on new-home production and pulled fewer permits for new homes in May in response to an expected lull in buyer demand following expiration of the tax credits at the end of April,” noted Bob Jones, chairman of the National Association of Home Builders (NAHB).

“Today’s numbers show an anticipated pull-back on single-family building following the tax credit deadline,” acknowledged NAHB Chief Economist David Crowe. “No doubt, a certain amount of building and buying activity that would have taken place in May was pulled forward to accommodate the program’s end date, which is why we have projected some softening of the numbers in the second quarter. That said, in the coming months, an improving economy, rising employment, low mortgage rates and stabilizing home values should play their part to keep the housing market moving forward.”  Crowe noted, however, that the ongoing difficulties builders are having in obtaining financing for viable new projects and accurate appraisals of new homes are complicating factors that are slowing the industry’s recovery.

The decline in housing starts in May was entirely on the single-family side, where the government’s tax credits for first-time and repeat buyers had the greatest impact in the previous months. In that segment, starts fell 17.2 percent to a seasonally adjusted annual rate of 468,000 units, their slowest pace since May of 2009. Meanwhile, multifamily starts, which can be more erratic on a monthly basis, showed a dramatic 33 percent gain in May to a rate of 125,000 units.

Permit issuance, which can be an indicator of future building activity, fell 9.9 percent on the single-family side to a rate of 438,000 units in May, which was also the slowest pace since May 2009. Multifamily permit issuance rose 9.7 percent to 136,000 units in May.

Regionally, housing starts in the Midwest posted a 4.9 percent increase, while permits fell in every region, with a 9.6 percent decline in the Midwest.

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