March sales came in at a seasonally adjusted annual rate of 526,000, the Census Bureau report showed, down 8.5% from a revised 575,000 in February and down 36% from a year earlier. It was the lowest annual rate since October 1991.
Economists were expecting new home sales to decline to 580,000 from the originally reported 590,000, according to estimates compiled by Briefing.com. The median price of a new home sold in March was $227,600, down 13.3% from a year earlier. The last time the median home price fell this sharply was July 1970, when it dropped 14.6%.
Thursday's report "paints the picture that the downturn in the housing market continues," said Scott Anderson, senior economist at Wells Fargo.
Despite a large cut in median home price, the report showed an increase in the months of inventory. The seasonally adjusted estimate of new houses for sale at the end of March was 468,000, which was down slightly from February's 471,000. However, at the current sales rate, it would take 11 months to sell the supply of homes on the market at the end of March.
The months-of-supply number has not been this high since September 1981. Given the large number of homes on the market and the sluggish sales pace, Anderson estimates that home sales are not likely to pick up for several more months.