WASHINGTON (AFP) — Sales of new US homes plunged to their lowest level in over 16 years in March despite hefty home price declines in response to a glut of unsold homes, Commerce Department data showed Thursday.

The grim monthly snapshot on sales of newly built homes came two days after a key industry survey said sales of existing homes had slid further in March, underscoring the worst housing sector slump in decades.

Most analysts say the market has not yet reached bottom after the collapse of a boom market two years ago that has weakened the economy and cost banks billions of dollars in losses.

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The Commerce Department reported March new home sales fell 8.5 percent to a seasonally adjusted annual pace of 526,000 units, well below analysts' consensus forecast for a rate of 580,000.

The March sales pace was the weakest since October 1991 and 36.6 percent below the March 2007 estimate of 830,000.

The median sales price of new houses sold in March was down 13.3 percent year-over-year at 227,600 dollars.

That represents the largest 12-month decline since 1970, and leaves median home prices at their lowest point since September 2006.

The average sales price of a new home was 292,200 dollars, down 11.3 percent over the last year, a new record 12-month decline.

Builders cut 1.1 percent off the actual number of unsold homes to 468,000, but with the slowing sales rate they were left with an 11-month supply, the largest inventory overhang since an 11.3-month supply in September 1981.

"Excess supply remains significant, suggesting that the downward adjustment will continue in the months ahead," said Marie-Pierre Ripert, analyst at Natixis.

Ripert added that median prices are "likely to remain on their downward trend."

The Commerce report nipped a moderate opening rally on Wall Street as equities investors feared that housing woes could be deepening.

"This isn't a good report on any front, so it isn't surprising that the stock market suffered a dip in its wake," Briefing.com analysts wrote in a client note.

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