U.S. New Homes Sales Plummet 8.5% in March to Lowest Level Since 1991

New home sales in the U.S. were down for the fifth consecutive month in March, falling by 8.5% to 526k, much lower than the 580k level expected by economists, and setting a new low since October 1991. Inventories soared from already-worrying levels.

This follows a downwardly revised reading of 575k in February, from the previously reported figure of 590k. The revision makes for a 5.3% decline from January, compared with the 1.8% originally reported.

The median sales price of new houses sold in March was $227,600, down from February's revised median of $244,200. From a year ago, the median price of new homes has fallen 13.3%.

The overhang of supply soared to an 11-month supply. The February supply level was upwardly revised to 10.2 months from 9.8 months.

Regionally, new home sales fell across the board. In the Northeast, sales were down to 29,000, from 36,000 in the prior month, while in the Midwest sales were down to 63,000 from 72,000. In the South, sales fell to 312,000 from 327,000 a month earlier and in the West sales moved down by 18,000 to 122,000.

Earlier this week, the NAHB/Wells Fargo survey of builder confidence remained subdued at 20, where it has been for three months after rising from the record low of 18 in December 2007.

Prior to the release, Ellen Zentner, U.S. macro economist at the Bank of Tokyo-Mitsubishi, said several factors are preventing the housing sector from improving, including tight credit conditions and the fact potential homebuyers are sitting on the sidelines until prices stop deflating.

She also noted that the economy is continuing to lose jobs, and that consumers are worried about inflation eating up their disposable income, which prevents them from buying big-ticket items.

By Patrick McGee and edited by Stephen Huebl