According to the RICS Global Real Estate Weekly report, the US housing market may face uncertainty once the tax credits expire.

“As expected, new home sales in the US jumped 15% in April to 504,000 on the back of the rush by buyers to take advantage of the home buyer tax credit. This takes it to the highest level seen since May 2008. Existing home sales also showed strong gains, increasing by 7.5%, taking it to 5.7m annualized,” stated the report.

It continued, “This recent surge of home sales due to the tax credits shows their effectiveness which was similarly the case at the end of 2009 when the tax credits were initially meant to expire. Due to their success, there is now a fear of how the market will cope without these government subsidies. Indeed, May data for housing starts already shows the hangover from these policy inducements, with housing starts down 10% m/m.”

“This drastic decline in housing starts does suggest that the recovery in the housing market has lost some momentum, but RICS believes a renewed downturn is unlikely. The demand for home loans, which saw a rise of 7.5% in mortgage purchase applications last week after five straight weekly declines does offer hope the post-tax credit fall off would be temporary,” explained the report.