The seasonally adjusted annual rate of sales was a little more than 5 million. This time last year, it was 6.2 million.

Inventory has continued to climb as well. At the current pace of sales, it would take 10.5 months to strike deals on all the homes listed, the Realtors said. It was under 7.5 months this time last year.

MarketWatch notes that the inventory of single-family homes hit a 20-year high.

The NAR blamed the drop on the credit crunch, which intensified in August. "Some of the cancelled transactions will move forward as buyers apply for other loans," Lawrence Yun, NAR's senior economist, predicted in a statement.

Prices were also down last month. The average sales price dropped about 3 percent, to just under $258,000. The median price -- which represents the typical home, the one in the middle -- fell a bit more, about 4 percent.

Read on for a chart from Wachovia graphing how unsold home numbers have risen. (You'll see that they peaked in July. But because the pace of sales keeps slowing, the months needed to strike deals for all that inventory continues to rise.)