Soft Market in West Drives U.S. Home Sales to Drop

A subdivision project of residential homes in shown in Glenelg, Maryland. Reuters

New U.S. single-family home sales unexpectedly fell in March, but the decline was concentrated in the West region, suggesting that the housing market continued to strengthen.

The Commerce Department said on Monday that new home sales decreased 1.5 percent to a seasonally adjusted annual rate of 511,000 units. February's sales pace was revised up to 519,000 units from the previously reported 512,000 units.

Sales rose in the Midwest and South, but tumbled in the West and were unchanged in the Northeast. Economists polled by Reuters had forecast new home sales, which account for about 8.7 percent of the housing market, rising to a 520,000 unit-rate last month.

New home sales are volatile month-to-month. The decline in sales over the past three months likely does not signal a slowdown in the housing market, given a strong labor market and historically low mortgage rates.

A report last week showed a 5.1 percent surge in sales of previously owned homes in March. Labor market strength has increased employment opportunities for young adults, boosting household formation.

But a shortage of properties for sale, which is limiting choice for buyers and driving up prices, remains a constraint for the housing market.

Last month, the inventory of new homes on the market rose 2.1 percent to 246,000 units, the highest since September 2009.

Despite the increase, new housing stock remains less than half of what it was at the height of housing bubble.

At March's sales pace it would take 5.8 months to clear the supply of houses on the market. That was the most since last September and was up from 5.6 months in February.