The results show builders ramped up to meet demand from buyers seeking to take advantage of federal tax incentives, but are now scaling back their plans.

Building permits, a gauge of future activity, sank 11.5 percent to an annual rate of 606,000, the lowest since October 2009, the Commerce Department said Tuesday. Analysts were expecting a slight dip to a rate of 680,000.

Home sales have rebounded this year. They were helped by low mortgage rates and two government tax credits - $8,000 for new buyers and $6,500 for current owners who buy and move into another property. To receive the tax credit, borrowers had to have a signed offer by April 30 and must close the deal by the end of June.

"There is little doubt the housing numbers have been boosted," by the tax credit, wrote Dan Greenhaus, chief economic strategist with Miller Tabak + Co.

Without the tax credits, many experts anticipate home sales will slow in the second half of this year. In addition, high unemployment and tight standards for mortgage lending continue to keep many buyers on the sidelines...........read more