New home sales in the U.S. plummeted in March by the biggest margin in just under two years, reversing three months of gains in the struggling housing market. The Commerce Department reported Thursday that sales fell by 11.4 percent to a seasonally adjusted annual rate of 481,000 units, the biggest percentage drop since July 2013.
Sales in the month of February was revised up to 543,000 units, which was the highest level since February 2008 and up from the previously reported 539,000 units. However, when averaging in March’s sales pace it would take 5.3 months to clear the supply of houses on the market, up from 4.6 months in February.
New homes sales tumbled 33.3 percent in the Northeast and 3.4 percent in the West. Sales in the South, where most new housing activity takes place, dropped 15.8 percent. It was the biggest decline since July 2013. In the Midwest, new home sales actually rose 5.9 percent.
The stock of new houses available on the market rose 1.9 percent last month to 213,000. However, supply still remains less than half of what it was at the height of the housing boom and the data was way off the mark.
Economists polled by Reuters had forecast new home sales, which account for 8.5 percent of the market, falling to a 513,000-unit pace last month. Data on Wednesday showed that existing home sales, or previously owned homes, hit an 18-month high in March.
The fairly upbeat report will not be enough, however, to sway economists’ expectations on second quarter growth following a considerably weak first quarter. Considering the abysmal data on retail sales, housing starts, manufacturing and now new home sales, it is unlikely the Federal Reserve will start to raise interest rates in June.