WASHINGTON, March 19 (Reuters) - Sales of new U.S. single-family homes fell more than expected in January, hitting their lowest level in nearly 3-1/2 years, likely weighed down by harsh winter weather.   

New home sales tumbled 17.6% to a seasonally adjusted annualized rate of 587,000 units, the lowest level since October 2022, the Commerce Department's Census Bureau said on Thursday.

Data for December was revised lower to show sales falling to a pace of 712,000 units instead of the previously reported 745,000 unit rate. Economists had expected home sales to fall to a rate of 720,000 units in January. Sales dropped in all four regions. 

Snowstorms and frigid temperatures walloped large parts of the country in January, which could have made it difficult for prospective buyers to venture out and view properties.

The Census Bureau is still catching up on data releases following delays caused by last year's government shutdown.

New home sales account for a small share of U.S. home sales and tend to be volatile on a month-to-month basis. They are counted at the signing of a contract. New home sales plunged 11.3% on a year-over-year basis in January.

The decline was despite a decrease in mortgage rates at the start of the year after President Donald Trump ordered government-backed mortgage firms Fannie Mae and Freddie Mac to expand purchases of mortgage-backed securities.

Mortgage rates have, however, increased in recent weeks as the U.S.-Israeli war with Iran raised oil prices by more than 40% since the conflict started at the end of February, driving up U.S. Treasury yields. Mortgage rates track the benchmark 10-year Treasury yield. 

The rising trend could limit any rebound in new home sales and keep supply elevated. High new housing inventory, together with elevated construction costs because of import tariffs and shortages of labor due to an immigration crackdown are hindering single-family home construction. Building lots are also scarce.

New housing inventory climbed to 476,000 units in January from 474,000 units in December. 

At January's sales pace, it would take 9.7 months to clear the supply of new houses on the market, up from 8.0 months in December. The median new house price dropped 6.8% to $400,500 in January from a year earlier. Most of the homes sold in January were under $499,999.