The number of contracts to purchase previously owned houses plunged in May by more than twice as much as forecast after a homebuyer tax credit expired.
The index of pending home resales dropped 30% from the prior month, figures from the National Association of Realtors showed Thursday. The drop was the biggest in records dating to 2001, and compared with a 14% decrease forecast in a Bloomberg News survey of economists.
The decline shows that the industry at the center of the financial crisis remains vulnerable in the absence of government support.
Stabilization in housing will depend on gains in incomes and employment that may stem foreclosures and give Americans the confidence to start buying again.
"Demand will be pretty depressed in the next few months," Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Fla., said before the report. "We're still going to have a big overhang of foreclosures. There's potential for prices to slow down a lot more."
Forecasts for the decline in pending home sales ranged from 4% to 25%, according to a Bloomberg survey of 36 economists.