Housing fears spike

The housing market may be on the verge of taking another plunge that could weaken the broader economic recovery.

Sales of previously occupied homes dipped in May, even though buyers could receive government tax credits. And nearly a third of those sales were from foreclosures or other distressed properties. That means home prices could soon be heading down after stabilizing over the past year.

Last month’s sales fell 2.2 percent from the previous month to a seasonally adjusted annual rate of 5.66 million, the National Association of Realtors said. Analysts who had expected sales to rise expressed concern that the real estate market could tumble once the benefit of the federal tax incentives is gone entirely, starting next month.

The report is “a worrisome sign for what will occur in July and thereafter when the effect of the tax credit is behind us,” said Joshua Shapiro, chief US economist at MFR Inc., an economic consulting firm in New York.

Still, most economists don’t expect the housing market to be weak enough to pull the economy back into recession. They anticipate that home sales will dip over the summer, then start growing by fall.