WASHINGTON -- Sales of new U.S. single-family homes tumbled to their lowest level in eight months in March, dealing a setback to the housing market recovery.
The Commerce Department said Wednesday sales dropped 14.5 percent to a seasonally adjusted annual rate of 384,000 units, declining for a second consecutive month.
Economists polled by Reuters had forecast new home sales at a 450,000-unit pace last month.
Compared to March last year, sales were down 13.3 percent, the largest year-on-year decline since April 2011.
U.S. Treasuries extended gains on the report. The S&P 500 homebuilding index dropped 1.65 percent following the data, and an index of smaller builders tumbled 3.3 percent.
The housing market has been slammed by an unusually cold and snowy winter, higher mortgage interest rates and a shortage of properties that is limiting options for potential buyers.
House prices, whose increases have outstripped wage gains, are also weighing on the sector.
New home sales are counted at the signing of contracts. Last month's surprise decline could still reflect some of the impact from the cold weather. Sales plunged in the Midwest and the South. They also fell in the West, but rose in the Northeast.
%VIRTUAL-article-sponsoredlinks%While housing is struggling, other sectors of the economy such as manufacturing are regaining momentum as the weather improves.
In a separate report, financial data firm Markit said its preliminary or "flash" U.S. Manufacturing Purchasing Managers Index was little changed in April.
The survey's measure of output, however, hit its highest level since March 2011, while new orders increased.
"With manufacturing acting as a good bellwether of the rest of the economy, the survey bodes well for further robust economic growth in the second quarter," said Chris Williamson, chief economist at Markit.
Although new home sales are volatile month-on-month and account for less than 10 percent of the overall market, the drop last month offered confirmation that housing would again be a drag on gross domestic product in the first quarter.
The inventory of new houses on the market increased 3.2 percent to 193,000 units in March, the highest since November 2010. While the stock of new houses on the market has come off a record low hit in July 2012, it remains at less than half of its pre-recession level.
Builders have been complaining about a shortage of building lots and skilled labor, as well as high material costs.
March's weak sales pace pushed the months supply of houses on the market to 6.0, the highest level since October 2011. That was up from 5.0 months in February.
The median price of a new home last month rose to $290,000, up 12.6 percent from $257,500 in March of last year.
-Additional reporting by Rodrigo Campos in New York.
9 Numbers That'll Tell You How the Economy's Really Doing
New Home Sales Dive to 8-Month Low in March
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.