Sales of new homes plummeted in August, dropping deeper than even bearish analysts' expectations to a seasonally adjusted pace of 460,000, which is 11.5 percent lower than the previous month.

Year-over-year, the picture remained glum, with the August figures standing 34.5 percent below the same month last year.

Despite the fact that builders have significantly cut production of new homes, the inventory situation remained elevated in August, with 10.9 months of new homes on the market. These homes are also taking increasingly longer to sell. According to today's Census data, these houses have been on the market for a median of 8.1 months.

Not surprisingly, prices fell against this backdrop. In August, the median sales price for a new home dipped 5 percent, to $221,900.

Alison Rice is senior editor, online, at BUILDER magazine.