WASHINGTON - Sales of new U.S. homes unexpectedly plunged in March to the lowest level in eight months, reflecting a broad-based retreat that signals the industry is facing bigger challenges than just bad weather.
Sales dropped 14.5 percent to a 384,000 annualized pace, lower than any forecast of economists surveyed by Bloomberg and the weakest since July, U.S. Commerce Department data showed today in Washington, D.C. The median forecast of 74 economists surveyed by Bloomberg News called for the pace to accelerate to 450,000.
The housing recovery has slowed as higher borrowing costs and rising prices make properties less affordable. Shortages of buildable lots and skilled labor also have hindered construction as the market heads into its busiest time of year.
“It’s the reduction in affordability, the lack of inventory, also weak growth in median household income - all these are contributing to the sluggish recovery in housing,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pa., who forecast sales would drop in March. “It’s going to raise concerns about the strength of the housing recovery, but it’s too early to be too worried.”
Stock extended earlier losses after the report. The Standard & Poor’s 500 Index dropped 0.1 percent to 1,876.9 at 10:33 a.m. in New York. The S&P Supercomposite Homebuilding Index declined 2 percent.
Economists’ estimates for the annual sales rate ranged from 428,000 to 476,000. The Commerce Department revised the February reading up to a 449,000 pace from a previously estimated 440,000.
The last time sales were this low or dropped as much in one month was in July, when interest rates on U.S. 10-year notes rose more than a percentage point from May after Federal Reserve policy makers indicated they would begin to trim asset purchases.
The median sales price of a new house climbed 12.6 percent from March 2013 to a record $290,000, Wednesday’s Commerce Department report showed.