Sales of new homes unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market.
Purchases fell 2.2%, to an annual pace of 308,000, according to Commerce Department figures released Wednesday.
The median sales price climbed by the most in more than two years.
The new-home market is vying with foreclosure-induced declines in prices for existing homes in an economy where unemployment is forecast to average 9.6% this year, close to a 26-year high.
"It's going to be a long, slow slog and the lagging sector will be new-home sales because they have to compete with existing sales and foreclosures," Bill Hampel, chief economist at the Credit Union National Association in Washington, said before the report came out.
"New-home sales probably have until the fourth quarter until they start recovering," Hampel said.
Sales were projected to climb to a 315,000 annual pace, according to the median estimate in a Bloomberg News survey of 78 economists.
Forecasts ranged from 275,000 to 343,000. The Commerce Department revised January data to show 315,000 sales at an annual pace, up from the previously estimated 309,000.
The report on home sales showed purchases dropped in three of four U.S. regions last month, those where sales were most likely to have been affected by the winter storms.
Purchases fell 20% in the Northeast, 18% in the Midwest and 4.6% in the South, which includes the Washington area.
Demand climbed 21% in the West, pushing the year-over-year increase in that region up to 35%, the biggest 12-month jump since March 2004.
The median price of a new home in the U.S. rose 5.2% year over year in February, to $220,500, the largest increase since September 2007.
The supply of homes at the current sales rate increased to 9.2 months' worth, the highest since May, from 8.9 months in January.
Housing, the industry that triggered the worst recession in seven decades, showed signs of recovering in 2009 as an $8,000 first-time-buyer tax credit boosted sales ahead of its originally scheduled expiration in November.
Extension of the credit for contracts signed by April and its expansion to include some current homeowners has failed to boost sales in recent months.
New-home purchases are considered a leading indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier.
Sales of existing homes fell 0.6% in February, to a 5.02 million rate, the lowest since June, and the inventory of unsold homes rose to its highest level in almost two years, the National Association of Realtors reported Tuesday in Washington.
Prices for existing home have dropped as a result of foreclosures, which RealtyTrac Inc. forecasts will reach a record 3 million this year. Such sales draw buyers away from the market for new houses.
A lack of jobs is another hurdle to a housing recovery.
Economists surveyed by Bloomberg in early March forecast the jobless rate this year will average 9.6%, near the 26-year high of 10.1% reached in October.
The end of Fed purchases of mortgage-backed securities, aimed at keeping borrowing costs low, is another challenge for the industry. The program is scheduled to expire at the end of this month.
"Promoting and maintaining stability in the housing market is critical to achieving economic recovery and sustainable long-term growth," Treasury Secretary Tim Geithner said Tuesday in testimony before Congress.
