The depressed American housing market lurched further downwards last month with fresh data showing that new home sales fell to a 17-year low in March, as the average price dived by $16,600 (£8,420) in a single month.

The decline in the housing market’s fortunes last month was far worse than expected and is so severe that analysts now expect America’s housing crisis to cut the country’s economic growth in half this year.

Purchases of new, as opposed to existing, homes fell by 8.5 per cent from the month before, to an annual rate of 526,000 in March, marking the lowest level since October 1991, according to the Commerce Department.

To make matters worse, the median new-home price declined by 13.3 per cent to $227,000 in the year to March, the biggest decline in nearly 40 years.

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Kevin Logan, a senior economist at Dresdner Kleinwort in New York, said: “These figures are particularly bad and mean that new home sales are now down 56 per cent on their peak in 2005, which is the biggest decline we have seen in any recession since the 1960s.

“This suggests that builders will be cutting back on building more homes and, overall, we anticipate that the housing crisis will drag about 1 per cent off GDP growth,” Mr Logan added.

A one-percentage point drop in GDP would halve economic growth to 1 per cent this year, Mr Logan said. New home sales in March were 36.6 per cent lower than the year before. Much of the past year’s average new home price decline came in the month of March, when the price fell by 6.8 per cent.

However, this decline is less than the 8.5 per cent drop recorded in December, as the average new-home price plunged from $249,100 to $227,700. The impact of these declines has been mitigated by price rises in some of the past few months.

Economists were nonetheless concerned by the severity of March’s new home sales decline. They had expected March new home sales to fall from an annual rate of 590,000 in February, to 580,000, rather than the much lower figure of 526,000 eventually recorded for the month.

The supply of unsold homes fell by 1.1 per cent to 468,000 in March, compared with the month before. This would take 11 months to clear at March’s rate of sales. Meanwhile, it would have taken 10.2 months to clear February’s stock at that month’s rate of new home sales.

Separately, America’s economic outlook declined further as data, also from the Commerce Department, showed that orders to factories for durable goods – expensive items such as fridges, cars and computers – fell by 1.5 per cent in March, their third consecutive monthly decline.

However, the US economy was given some reprieve as the Labour Department reported that claims for unemployment benefits declined by 33,000 last week to 342,000. This surprised economists who had collectively predicted a 3,000 rise in claims.

The new homes data for March came in the same week that the National Association of Realtors said that sales of existing homes fell by 2 per cent in March.

The housing market is key to the health of the US economy, since it determines consumer confidence which, in turn, dictates how much people borrow and spend.

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