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 The Commerce Department said on Wednesday sales dropped 14.5 percent
to a seasonally adjusted annual rate of 384,000 units. It was the
second consecutive monthly decline and the biggest since July, which
was also the last time sales were so slow.
Sales were down 13.3 percent from a year ago, marking the largest
year-on-year decline since April 2011.
Economists, who had expected sales to increase, said the drop
suggested some fundamental weakness in the market, although
unusually cold weather had also dampened activity.
"The weak tone of this report is a bitter pill for those, including
ourselves, who have been looking for signs of a spring thaw in the
housing recovery," said Millan Mulraine, deputy chief economist at
TD Securities in New York.
U.S. housing stocks took a beating on the dour report, with the S&P
500 Homebuilding Index ending down about 1.1 percent. An index of
smaller builders closed about 4.0 percent lower.
Luxury home builder Toll Brothers fell 1.8 percent and DR Horton,
the largest U.S. homebuilder, dropped 2.4 percent. The broad U.S.
stock market ended marginally lower after six sessions of gains.
The housing market was slammed by the unusually cold and snowy
winter, but higher mortgage rates, a run-up in prices and a shortage
of properties that limited options for buyers have also cut into
activity.
New home sales last month dived in the Midwest and the South, where
unusually cold weather lingered early in the month. They also fell
in the West. While sales in the Northeast rose, they failed to
recoup even half of the prior month's 33.3-percent plunge.
"The rise in interest rates and prices of new homes is leaving some
potential buyers with sticker shock," said Bill Banfield, vice
president at mortgage lender Quicken Loans in Detroit.
RECOVERY DELAYED
Data on Tuesday showing a mild decline in home resales in March had
offered hope the housing market was stabilizing.
But the new home sales data and another report on Wednesday showing
a drop in mortgage applications both suggested it would probably be
a while before housing found its footing.
The sector's weakness could help convince the Federal Reserve to
keep benchmark interest rates near zero long after it ends a
bond-buying stimulus program later this year.
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Even so, it is unlikely to derail the economy given that other
sectors, such as manufacturing, are regaining momentum.
Financial data firm Markit said its preliminary manufacturing
purchasing managers index was little changed in April. The survey's
measure of output, however, hit its highest level since March 2011,
with new orders increasing.
"This improvement is broadly consistent with our view that
manufacturing production is going to pick up in the second quarter
following a soft first quarter," said Daniel Silver, an economist at
JPMorgan in New York.
Though new home sales are volatile month-on-month and account for
less than 10 percent of the overall market, the drop in March
confirmed that housing would again be a drag on gross domestic
product in the first quarter. In the fourth quarter, it subtracted
from GDP for the first time in three years.
Last month, the inventory of new houses on the market increased 3.2
percent to the highest level since November 2010.
While the stock is up from a record low hit in July 2012, it is not
even halfway back to its pre-recession level.
March's weak sales pace pushed the months' supply of houses on the
market to 6.0, the highest level since October 2011, from 5.0 months
in February.
Nevertheless, the median price of a new home last month rose 12.6
percent from March last year to a record $290,000, a reflection of
the still-lean inventories.
(Reporting by Lucia Mutikani; additional reporting by Rodrigo Campos
in New York; editing by Tim Ahmann and Paul Simao)
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