New home sales increased for the fifth straight month in August, but the 0.7% gain didn’t match the median estimate of +1.6%. The annual pace of sales is now 429,000, 3.4% below the August 2008 rate.

Not only were sales lower than expected, they were also so lopsided that only one of the four areas even experienced growth. Sales in the West jumped 12.1%, but sales fell 16.3% in Northeast and 5.8% in the Midwest,  activity in the South was flat.

There was some good news though: five months of sales increases has caused excess inventory to dwindle. At the current sales place there are just 7.3 months’ worth of supply on the market, compared with 7.6 months’ in July and 12.4 months’ at the beginning of the ear.

“Virtually all of the remaining excess is in completed homes, rather than in homes still under construction,” said analysts from Nomura. They also noted that with raw inventory at 262k units, overhang is at the lowest level in 25 years. 

The cutback has come at a price though . . . literally. The median sales price of new houses sold in in the month dropped to $195,200, a significant decline from the $215,600 price in July. Since its peak, prices have deflated 25.7%. 

Elsewhere in the report, revisions added 1.8% to the sales pace for May and June, but July’s dramatic 9.6% surge was trimmed to 6.5%.

“The recovery road, as is glaringly evident today, is fraught with bumps and potholes,” said Jennifer Lee, economist at BMO. “But, we are still on that road.”