WASHINGTON (AP) — Sales of new U.S. homes plummeted in March, as the spring buying season opened with sharp declines in the Northeast and South.
The Commerce Department said Thursday that new-home sales fell 11.4 percent last month to a seasonally adjusted annual rate of 481,000. This marks a swift reversal from an annual sales pace of 543,000 in February, which had been the strongest performance in seven years.
Purchases of new homes have been volatile on a monthly basis, although sales during the first quarter of 2015 are higher than in 2014. The volatility points to a real estate market still finding its footing in the aftermath of the housing bubble that triggered the Great Recession in 2007 and the weak recovery that has followed.
"The pace is sluggish, but the trend in new home sales is still higher, said Jennifer Lee, a senior economist at BMO Capital Markets. "Don't be surprised to see a bounce back in April."
New-homes sales last month plunged 33 percent in the Northeast and 15.8 percent in the South, while the West registered a slight loss and the Midwest reported a modest gain. The median sales price fell 1.7 percent since March 2014 to $277,400.
Despite last month's sales decline, homebuilders are hopeful that the spring buying season will draw more buyers.
Winter storms in January and February closed construction sites and likely pushed back potential March sales to later in the year. At the same time, a yearlong hiring spree coupled with low mortgage rates has expanded the number of people shopping for a home.
The National Association of Home Builders/Wells Fargo builder sentiment index rose in April, and the outlook for sales of single-family houses over the next six months climbed to its highest level since December.
In a separate report Wednesday, sales of existing homes surged in March. The higher demand, however, has yet to cause additional listings to come onto the market. That could prompt construction firms to quicken the pace of building, leading more buyers to choose to purchase a new home instead.
Sales of existing homes rose 6.1 percent last month to a seasonally adjusted annual rate of 5.19 million, the National Association of Realtors said in its report.
The existing-home market had just 4.6 months of supply nationwide, well below the six months of supply that economists say would reflect a healthy market.
Some homeowners are choosing to renovate instead of selling their home and upgrading. An index measuring renovation plans by Houzz, an online firm for home remodeling and design, rose during the first three months of this year compared to the end of 2014.
There is also rising demand for housing as the economic recovery approaches its seventh year.
Job growth and low mortgage rates have put homebuyers in a stronger financial position.
Employers have added 3.1 million jobs over the past year, as the unemployment rate has tumbled from 6.6 percent to 5.5 percent. The hiring has increased the number of paychecks in the economy and created more potential for consumers to spend.
It has also become cheaper to borrow to buy a home. Average 30-year fixed rates were 3.65 percent this week, according to the mortgage giant Freddie Mac. That average has dropped sharply from a 52-week high of 4.33 percent.