New home sales in March fell to the lowest level in 17 years across the United States, according to a key government report released on Thursday.

U.S. home builders have cut down their average prices by a record amount, but new home sales still plummeted by 8.5 percent to a seasonally adjusted annual rate of 526,000 units, which is the lowest since a 524,000 rate recorded in the month of October, 1991.

The market analysts surveyed by Thomson's IFR Markets had projected the new home sales to increase at an annual rate of 580,000 in March.

"[The report] paints the picture that the downturn in the housing market continues," Scott Anderson, senior economist at Wells Fargo, told CNN Money.

The Commerce Department estimated on Thursday that the new home sales have fall down by as much as 36.6 percent compared with a year ago.

The median price of a home sold in March fell by 13.3 percent, compared to the same month a year ago to $227,600 and the months' supply of homes on the market increased to 11 months.

The report also revised new home sales for the months of January and February down by a net 9,000, while the annual rate of sales in March was reduced to 575,000. (AHN)