New-home sales in the U.S. took a surprising plunge in March to the lowest level in eight months as buyers balked at record prices and higher mortgage rates that made properties less affordable.
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, Commerce Department data showed today in Washington. Three of the four regions of the country saw setbacks, with demand in the West slumping to the lowest level in more than two years.
Rising property values, borrowing costs that have jumped almost a percentage point from last year and strict lending rules for those willing to buy represent challenges for the industry that is still trying to emerge from the worst slump since the Great Depression. 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, Pennsylvania, 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."
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