Purchases of new single-family homes decreased 2% to a 772,000 annualized pace following a downwardly revised 788,000 in January, government data showed Wednesday. The median estimate in a Bloomberg survey of economists called for a 810,000 rate.

The drop in sales suggests buyers are shying away from the market amid high home prices and rising mortgage rates as the Federal Reserve tightens policy. A recent report showed a measure of homebuilders' sales expectations for the next six months slumped in March to the lowest since June 2020 amid growing concerns over the combination of rising construction costs and higher interest rates.

"We recognize that interest rates are rising and inflation is a legitimate threat," Stuart Miller, executive chairman of Lennar Corp., said on an earnings call last week. Still, the homebuilder reported better-than-expected quarterly orders and raised its forecasts on expectations that demand will continue to outweigh supply.