New-home sales in California slowed dramatically in May from a year earlier, an industry group reported, but mortgage default notices hit a three-year low.

The California Building Industry Association attributed much of the slowdown to the expiration of an $8,000 federal tax credit.

The monthly CBIA/Hanley Wood Market Intelligence New-Home Sales and Pricing Report showed that sales in new-home communities of 10 units or more were 46 percent below May 2009.

During May of this year, 1,745 new homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 3,200 a year earlier.

Sales of single-family homes were down by 45 percent, while sales of townhomes and duplexes and triplexes were off by 37 percent. Condo sales declined 55 percent from a year ago.

"I do think the new-home buyers was more affected by the $8,000 credit," said James Joseph, owner of Century 21 Ambassador and Coldwell Banker Ambassador in Whittier.

Joseph said developers of new-home tracts were better than Realtors at getting the word out on the federal tax credit.

"Every time you pick up a flier for a new home development it's mentioned," he said. "But I also think that all the credit really did was move purchases forward that would have happened later."

Statewide sales of new homes are down significantly, but Joseph said his offices aren't experiencing that severe of a slowdown.

"I'd say we're down 10 to 15 percent," he said. "And my guys aren't telling me that the condo market is dramatically different than the single-family market."

On a more positive note, mortgage default notices for California homeowners have fallen to a three-year low after a fifth straight quarterly decline as conditions improved in more affordable, foreclosure-battered markets, MDA DataQuick reported Wednesday.

There were 70,051 default notices filed in California from April through June, down 43.8 percent from 124,562 during the same period last year and down 13.6 percent from 81,054 in the first quarter of 2010.

Marty Rodriguez, owner of Century 21 Marty Rodriguez in Glendora, said new-homes sales in California have taken a hit because developers have had trouble getting the needed funding to finish their projects, leaving some homes unbuilt.

"A lot of these homes weren't going to be ready anyway," she said. "The bottom line is, they are trying to find someone to finance their projects ... investors are running scared."

Jonathan Dienhart, director of published research for HWMI, said California's figures for May were similar to sales trends across the country.

"With the end of the federal tax credit has come a harsh reality check for housing," he said. "Similar to what we saw last year with auto sales and the Cash for Clunkers program, there is quite a let-down in sales pace after the subsidy ends."

Hopefully, the industry will see some stabilization in new-home purchases in coming months, Dienhart said, and that would provide a better indication of where the market really stands.