Here we go again, as if we need to be constantly reminded of the difficulties remaining in the housing sector and with the credit markets.  Of course, 30 year mortgage rates are down, but they only give that a small blip in the news coverage. 

Demand for previously owned homes tumbled in August to the lowest level in five years as mortgage market troubles hurt sales.

Separately, U.S. consumer confidence fell to a nearly two-year low in September, weighed down by a softening labor market and worries over volatility in financial markets and a weaker dollar, according to a report Tuesday from the Conference Board.

Home resales fell to a 5.50 million annual rate, a 4.3% decrease from July's unrevised 5.75 million annual pace, the National Association of Realtors said Tuesday.

The August resales level was in line with Wall Street expectations. It was the lowest pace since 5.36 million in August 2002. "The credit market freeze in August no doubt contributed to the sales decline," NAR senior economist Lawrence Yun said.

The median home price was $224,500 in August, up 0.2% from $224,000 in August 2006. The median price in July this year was $228,700.

In a separate report, Standard & Poor's S&P/Case-Shiller home price index fell in July as 16 of 20 major metropolitan areas saw a decline in annual growth rate.The 10-city composite index fell 4.5% in July from a year earlier, while the 20-city composite index was down 3.9%.

Mr. Yun said the unusual disruptions in the mortgage market, including a significant climb in jumbo loan rates resulted in a fairly high number of postponed or canceled sales. "Lower sales contributed to a buildup of unsold inventory," he said.

Inventories of homes rose 0.4% at the end of August to 4.58 million available for sale, which represented a 10.0-month supply at the current sales pace. There was a 9.5-month supply at the end of July, revised from a previously estimated 9.6 months.

Existing-home sales tumbled in all regions. Sales dropped 5.2% in the Midwest, 2.0% in the Northeast, 9.8% in the West, and 2.7% in the South.

The average 30-year mortgage rate was 6.57% in August, down from 6.70% in July, according to Freddie Mac.