The Commerce Department reported Thursday that sales of new homes dropped 8.5% last month to a seasonally adjusted annual rate of 526,000 units, slowest sales pace since October 1991. That follows a downwardly revised 575,000 rate in February.

Economists polled by Reuters had forecast March sales to slow to a 580,000 annual pace from the previously reported 590,000 reading the month before.

The March median sale price for a new home was 13.3% below March 2007 and, at $227,600, was down 6.8% from the month before. The Commerce Department said the year-on-year percentage decline was the largest since a 14.6% drop in July 1970.

The dismal news on new-home sales followed earlier reports showing that sales of existing homes fell 2% in March. Housing, which boomed for five years, has been in a prolonged slump the past two years with sales and home prices falling most sharply in areas of the country that boomed the most.

For March, sales were down in all regions of the country, dropping most in the Northeast, a decline of 19.4%. Sales fell 12.9% in the West, 12.5% in the Midwest and 4.6% in the South.

The inventory of unsold homes dipped 1.1% to 468,000 which, at the current level of sales, would take 11 months to clear, up from February's 10.2 months' supply.

Contributing: Reuters

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