New-home sales tumbled to a record low in May after a government tax credit for home buyers expired, raising more concerns about the outlook for housing's recovery. Sales of new homes fell 32.7% from April to a seasonally adjusted annual rate of 300,000, the Commerce Department said Wednesday. That was the lowest since the government began compiling data in 1963. New-home sales data are based on contracts signed, not closings. The median sales price in May was $200,900, down 9.6% from a year earlier and the lowest since December 2003. The report followed Tuesday's news that existing-home sales fell 2.2% in May, surprising economists who had been expecting an increase. That's a concern because renewed weakening in the housing market could delay a broader economic recovery. For home builders, last month's plunge in sales points to competition from a glut of existing homes for sale and a significant dropoff in buyer interest. "The gauges are all saying the credit really increased sales and pushed them from May and into April," says David Crowe, chief economist at the National Association of Home Builders. The seasonally adjusted estimate of new houses for sale at the end of May was a low 213,000. That represents a supply of 8.5 months at the current sales rate, up from 5.8 months in April. Even with the plunge in May contracts, the inventory of unsold new homes shrank last month to the lowest level in more than three decades. The continued decline in inventory puts builders in a better position once demand picks up, which should be this winter, says Bernard Baumohl at The Economic Outlook Group. To woo buyers, 56% of home builders are reducing prices or offering optional items at no cost — the same percentage as before the tax credit expired. The tax credit provided up to $6,500 for move-up buyers and up to $8,000 for first-time buyers. R. Randy Lee, CEO of Leewood Real Estate Group in New York, which has built about 6,000 homes in the past 20 years, is offering to match the amount a purchaser would have qualified for under the federal guidelines, and apply it as a credit toward closing costs, until July 4. "We finally were able to see this spring that the tax credit was encouraging business," Lee says. To claim the tax credit, buyers had to have a purchase contract by April 30 and must close by June 30. Congress is considering giving buyers who met the first deadline until Sept. 30 to close. Other recent reports that help measure the market for home builders are also pessimistic. Housing starts fell 10% in May. "Home builders have seen sales fall off sharply in May," says Mark Zandi, at Moody's Economy.com. "They're nervous about whether this is temporary or whether sales will be a lot weaker." Pulte Homes had expected to see a dropoff in sales, but it's not yet sure what impact the end of the tax credit will have. "Who knows what the hangover is going to be," says Caryn Klebba, a Pulte Homes spokeswoman. "We do know we expect to be profitable for the year. "We've moved away from building on 'spec' and didn't build on 'spec' for the tax credit." Guidelines: You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. Read more