WASHINGTON - The number of Americans buying new homes plummeted in March to the slowest pace in eight months, a sign that real estate's spring buying season is off to a weak start.
The Commerce Department said Wednesday that sales of new homes declined 14.5 per cent last month to a seasonally adjusted annual rate of 384,000. That was the second straight monthly decline and the lowest rate since July 2013.
Sales plunged in the Midwest, South and West in March. But they rebounded in the Northeast, where snowstorms in previous months curtailed purchases.
New-home sales have declined 13.3 per cent over the past 12 months.
"Our core view is that the housing market has stalled and won't contribute" to overall economic growth this year, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Rising home prices have caused some buyers to back off at the lower end of the market, while new-home buyers at the top continue to buy. As a result, median sales prices jumped 12.6 per cent during the past month to $290,000.
Home sales usually improve with the start of the spring. More would-be buyers venture to open houses. Families with children often begin to look for homes so that they can move once the school year ends.
Builders anticipated a snap back with the warmer weather. There were 193,000 new homes for sale at the end of the month, about 39,000 more than the same period last month.
Several other indicators also show that housing activity was muted last month.
The National Association of Realtors said Tuesday that sales of existing homes edged down 0.2 per cent to a seasonally adjusted annual rate of 4.59 million. It was the seventh drop in the past eight months.
Sales have fallen, in part, because few homes are for sale. There is a 5.2-month supply of existing homes on the market, much less than the 6-month level seen in healthier markets. More construction is needed to boost the supply, the Realtors' group argues.
But the improvement in building has been slight.
Builders started work on 946,000 homes at a seasonally adjusted annual rate in March, up 2.8 per cent from 920,000 in February, the Commerce Department said last week. Those figures include both single-family homes and rental properties. Applications for permits, a gauge of future activity, fell 2.4 per cent last month to a seasonally adjusted annual rate of 990,000.
The National Association of Home Builders/Wells Fargo builder sentiment index was 47 in April. Readings below 50 indicate that more builders view sales conditions as poor rather than good.
Sales have also been modest because of affordability issues.
Rising prices over the past year and higher mortgage rates have made it harder for many Americans to afford a home. Real estate data provider CoreLogic says home prices rose 12.2 per cent in the past year. Wage growth last year failed to keep pace with the higher buying costs.
The average rate on a 30-year mortgage was 4.27 per cent last week. Rates surged about 1.25 percentage points from May through September, peaking at 4.6 per cent. Those increases began after the Federal Reserve signalled that it would begin to pull back from its bond-buying program.
Those Fed bond purchases were designed to keep long-term interest rates low to spur more borrowing and boost economic growth. Since December, the Fed has reduced the size of its monthly purchases to $55 billion from $85 billion.