New-Home Sales in February Hit Seven-Year Low

New-home sales in America unexpectedly fell in February to the lowest level in almost seven years, dimming prospects for a quick revival in housing.

The supply of unsold homes climbed to the highest in 16 years, the Commerce Department said yesterday in Washington. Purchases dropped 3.9% to an annual pace of 848,000 last month. Economists had forecast they would rise to a 985,000 rate, based on the median forecast in a Bloomberg News survey.

The figures, made worse by the coldest February in more than a decade, doused optimism from reports last week on sales of previously-owned dwellings and housing starts. Some analysts read those numbers as evidence that the industry may be stabilizing, as the Federal Reserve has anticipated. Shares of homebuilders tumbled and bonds gained on speculation that the economy will slow further.

"We're probably not going to see the pickup in housing by the end of the year that we were looking for," an economist at Lehman Brothers Holdings Inc., Michelle Meyer, said. "Housing imbalances will take longer to correct because inventories aren't declining very fast."

The report points to more declines in home construction that will further weigh on the economy as a wave of mortgage foreclosures adds to the woes of builders including KB Home. The February pace of new-home sales was the slowest since June 2000.