US new home sales plunge in November

Tax credits on new homes have been extended until April

Sales of new homes in the US plunged in November, casting fresh doubts on the recovery in the housing market.

The Commerce Department said sales fell by 11.3% to a seasonally-adjusted annual rate of 355,000 homes, down from a revised 400,000 in October.

The fall reflects the extension of first-time buyer tax credits, which had been due to expire in November.

The total was far lower than analysts had expected, and the data wiped out early gains in shares on Wall Street.

The main Dow Jones index closed only slightly higher, up 1.51 points, or 0.01%, to 10,466.44.

Home sales had been boosted by buyers looking to take advantage of the tax credit, but now that they have been extended to April, the incentive to buy has disappeared, analysts say.

As a result, "buyer traffic is likely to be flat until spring," predicted Mark Vitner at Wells Fargo Securities.

The median sales price for November was $217,000 (£136,000).

Consumer spending

In separate figures released by the Commerce Department, US consumer spending rose 0.5% in November.

The increase was lower than the revised 0.6% rise in October.

The government data showed personal income grew 0.4% in November, the fastest growth since May.

Wage income climbed 0.3%, the largest growth since April.

The US economy grew by 2.2% pace in the third quarter, according to revised figures released on Tuesday.