The number of American's signing contracts to buy homes dropped to the lowest level ever in August new data shows.

The National Association of Realtors' index of signed purchase agreements fell 6.5 percent from the previous month, the group said on Tuesday in Washington.

The decline was more than anticipated and was also the lowest level on record since the group began tracking in 2001.

Compared with a year earlier, pending home sales were down 22 percent. Purchases declined in all four regions of the country, with the highest drop, of 9.5 percent, led by the South. The smallest drop was in the West, which notched a fall of 2.7 percent.

Higher credit costs and lending restrictions after the collapse in subprime mortgages may push the industry downturn well into 2008.

Market futures contracts show the Federal Reserve will probably cut rates later this month to avert spillover from the credit squeeze and keep the broader economy expanding.

"During the third quarter of 2007, there was a significant deterioration in market conditions," Jeffrey Mezger, chief executive officer at Los Angeles-based homebuilder KB Home said Sept. 27 on a conference call after the company reported a third-quarter loss. "At this time, we are not seeing any indication" that the market will improve quickly.