New home sales unexpectedly fell in July to the lowest level on record as the housing market continued to suffer from the end of the homebuyer tax credit boost.

New home sales dropped 12.4% to a seasonally adjusted annual rate of 276,000 last month, down from a downwardly revised 315,000 in June, the Commerce Department reported Wednesday. Sales year-over-year fell 32.4%.

Home sales had soared in March and April as homebuyers rushed to sign contracts ahead of the April 30 deadline for the $8,000 tax credit. But sales plummeted in May, the first month after the incentive expired, to an annual rate of 281,000. The pace only improved modestly in June.

On Tuesday, a real estate industry report showed that existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. The pace of sales of single family homes, which account for a bulk of the transactions, fell to the lowest level since May 1995.

A rebound in the housing market is considered a key element of the overall economic recovery, but that may be far off.

(Source: CNN)