Sales fell 12.4 percent during the month to a seasonally adjusted 276,000 units.

New-home sales dropped in July to a record low, the Commerce Department reported Aug. 25.

Sales fell 12.4 percent during the month to a seasonally adjusted 276,000 units.

"Today's report, though not unexpected, is disappointing in view of the improvement in sales activity that we saw in June," said Bob Jones, chairman of the National Association of Home Builders and a home builder from Bloomfield Hills, Mich. "Potential home buyers have become very hesitant due to uncertainty about the economy and job market, and are putting off the decision to buy until they feel more confident."

NAHB chief economist David Crowe said the report shows the market is struggling, although he foresees improvement in coming months.

"The slow pace of economic recovery and worries about job security are weighing heavily on the minds of potential home buyers right now,” Crowe said. "As a result, the housing market is clearly in a holding pattern. That said, NAHB does not project that a double-dip recession is in the cards, and we are looking for employment gains later this year to help bolster sales activity moving forward."