Sales of previously occupied homes took the largest monthly drop in more than 40 years last month
, sinking more dramatically than expected after lawmakers gave buyers additional time to use a tax credit
The report reflects a sharp drop
in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It had been due to expire on Nov. 30, but Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners who move.
"It's 'exit stage left' for first-time homebuyers," wrote Guy LeBas, an analyst with Janney Montgomery Scott.
December's sales fell 16.7 percent
to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said Monday. Sales were expected to fall by about 10 percent, according to economists surveyed by Thomson Reuters.
The report "places a large question mark over whether the recovery can be sustained when the extended tax credit expires
," wrote Paul Dales, U.S. economist with Capital Economics.
The median sales price was $178,300, up 1.5 percent from a year earlier and the first yearly gain since August 2007. However, some of that increase could be due to a drop-off in purchases from first-time buyers, who tend to buy less expensive homes.
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 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 percent of purchases in December, down from about half in November, the Realtors group said.