The annual sales pace of 460,000 homes was down 11.5 percent from July and sharply off the 510,000 pace expected by economists.
The median sales price of $221,900 was off 5.5 percent from July, the lowest since $211,600 in September 2004.
The August sales pace was the weakest since 401,000 in January 1991.
The 515,000 annual pace originally reported for July was revised to 520,000 homes.
The inventory of homes available for sale in August shrank 4.4 percent to 408,000, the lowest since August 2004. However, sales weakened so much that the months' supply at the current sales pace rose from 10.3 months in July to 10.9 months in August.