The increase in sales of existing homes during the late spring and early summer came to an abrupt halt in August, with total sales down 2.7% and single-family sales down 2.8%, the National Association of Realtors reported Thursday morning.

It was the first sequential drop in existing home sales after four months of significant gains.

Prices also continued falling, with the median price for all housing types at $177,700, a 12.5% drop from last August, and the single-family median price at $177,500, down 12.1%.

Total sales fell to a seasonally adjusted annual rate of 5.24 million, still up 3.4% from a year ago. Single family, at a rate of 4.61 million, is also still up year-over-year by 2.5%. Existing condo and coop sales were off 1.6% to a rate of 620,000 units in August, 10.1% higher than a year ago. The median existing condo price was down 15.7% to $179,300.

According to an NAR member survey, first-time buyers purchased 30% of homes in August and distressed homes accounted for 31% of transactions. Both were unchanged from July.

Total existing housing inventory at month's end was down 10.8% to 3.62 million, an 8.5-month supply, down from a 9.3-month supply in July. Unsold inventory totals are 16.4% lower than a year ago.

Lawrence Yun, the NAR's chief economist, said sales "retrenched from a very strong improvement in July but continue to be much higher than before the stimulus." He added, "Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process, but the decline demonstrates we can't take a housing rebound for granted."

The declines were across the board regionally. The Northeast was down 2.2% to an annual pace of 910,000, still 5.8% above August 2008, with the median price down 10.5% to $241,100. The Midwest fell 6.6% to a level of 1.14 million, flat with last August, and he median price was down 10.4% to $149,900. The South declined 3.1% from July to an annual pace of 1.89 million, 1.6% above August 2008, with the median price down 11% to $157,400.The West was off 2.7% to a pace of 1.16 million, 7.4% higher than a year ago, and the median price was down 12.2% to $220,500.

Yun said the decline points to the urgency behind the housing industry effort to persuade Congress to extend or expand the home-buyer tax credit that is set to expire at the end of November. "An extension of the tax credit is critical to preserve incentives for financially qualified buyers to enter the market," he said. "Now that the market is showing some momentum, we have an opportunity to achieve a more rapid and broader stabilization in home prices. Extending and expanding the tax credit also would help to keep other families from becoming upside down in their mortgages or risk foreclosure."