It was the fourth consecutive month of declines and the worst showing on records dating to 1963. January's results, meanwhile, were revised upward slightly to a pace of 315,000.
Economists surveyed by Thomson Reuters had expected February sales would rise to an annual rate of 320,000.
Sales plummeted dramatically in parts of the country that were hit with bad weather. In the Northeast, they fell 20 percent from a month earlier. Midwestern sales fell 18 percent. Sales fell nearly 5 percent in the South but rose 21 percent in the West.
The new home sales report reflects signed contracts to purchase homes rather than completed sales and thus gives economists a feel for how many buyers were out shopping for new homes in a given month.
The number of new homes up for sale in February increased slightly to 236,000. At the current sales pace, it would take more than 9 months to exhaust that supply.
There was some positive news for builders as the median sales price climbed on both a monthly and yearly basis. It rose to $220,500, up more than 5 percent from a year earlier and up about 6 percent from January.
Home sales have been sluggish during the winter even though the deadline for a tax credit for first-time home buyers was extended. It had been set to expire on Nov. 30. The earlier deadline caused sales to surge last fall.
Congress extended the deadline until April 30 and expanded it to cover existing homeowners who move. But economists and real estate agents say the extension has not had much of an impact on sales. That also was reflected Tuesday when the National Association of Realtors said sales of previously occupied homes dropped 0.6 percent in February to a seasonally adjusted annual rate of 5.02 million.
Some homebuilders say their outlook is getting better, but the recovery is not a strong one.
"A number of housing markets may be stabilizing or starting to rebound, though we do not yet see, in many respects, a sustained nationwide recovery," Jeffrey Mezger, president and chief executive officer of KB Home, a major builder, said Tuesday as his company reported a $55 million quarterly loss.