New U.S. single-family home sales were flat in August, but the supply of houses on the market tumbled to the lowest level in 42 years, government data showed on Friday.width=398

The Commerce Department reported August sales at a 288,000 unit annual rate, unchanged from July's rate, which was revised up from a previously reported 276,000 unit pace. Analysts polled by Reuters had forecast new home sales rising to a 290,000 unit pace in August.

The housing market is starting to stabilize after a downward spiral following the end of a homebuyer tax credit in April. Data this week showed home construction rose last month and sales of previously owned homes crawled off 13-year lows.

But activity in the sector, which contributed to the worst recession since the Great Depression, remains subdued amid a 9.6 percent unemployment rate.

The number of new homes available for sale fell 1.4 percent to 206,000 units, the lowest since August 1968. Despite August's unchanged sales pace, the supply of new homes on the market dipped to 8.6 months' worth from 8.7 months' worth in July.

The median sale price for a new home fell 0.6 percent last month from July to $204,700, the lowest since December 2003. Compared to August last year, the median price fell 1.2 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)