The Commerce Department said Friday that new-home sales dropped 1.6 per cent last month to a seasonally adjusted annual rate of 313,000 homes. Sales have fallen nearly 7 per cent since December.
While a mild winter and three months of strong job growth have lifted re-sales, those conditions haven't benefited the new-home market. The current pace is less than half the 700,000 that economists consider to be healthy.
Economists cautioned that the housing market is a long way from fully recovering.
"Despite renewed hopes over the turn of the year for an imminent turn in housing, it appears that it is too early for such optimism to translate into a rapid pick-up in real activity," said Yelena Shulyatyeva, an analyst at BNP Paribas.
There were some positive signs in the report. The government revised December's sales figures up to show an annual rate of 336,000, the best sales pace in a year.
And the median sales price for new homes surged in February more than 8 per cent, to $233,700. That's the highest median price since June and could suggest builders are anticipating more sales in the months to come.
Just 150,000 new U.S. homes were for sale in January and February — the lowest on records dating back to 1963. The supply of new homes on the market has consistently fallen over the past two years, which could help stabilize prices.
Jennifer Lee, senior economist at BMO Capital Markets, said the price increase was possibly "an indication of homebuilders' growing confidence in their sector."
Though new-home sales represent less than 10 per cent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.
Builders are growing more confident after seeing a growing number of people express interest in buying this year. They've responded by requesting the most permits to build single-family homes and apartments since October 2008.
Sales of previously occupied homes have risen more than 13 per cent since July. And January and February made up the best winter for re-sales in five years, when the housing crisis began.
A key reason for the dismal sales in the new-home market is that builders must compete with foreclosures and short sales — when lenders accept less for a house than what is owed on the mortgage.
Foreclosure activity surged in February across half of U.S. states. The pace of foreclosures is increasing now that states have reached a settlement with the nation's five biggest mortgage lenders over foreclosure abuses.
Builders have also stopped working on many projects because it's been hard for them to get financing or to compete with cheaper resale homes. For many Americans, buying a home remains too big a risk more than four years after the housing bubble burst.
Sales were mixed across the country. They fell 2.4 per cent in the Midwest and 7.2 per cent in the South. They rose 8 per cent in the West and 14.3 per cent in the Northeast.