Sales of new homes plunged in August by the largest amount in nine months as the nation's housing industry continued to flash mixed signals about whether the boom is starting to fade.

The Commerce Department reported that new-home sales declined by 9.9 percent last month to a seasonally adjusted annual rate of 1.24 million units. Even with the slowdown in sales, the median sales price rose 2.5 percent from July, to $220,300.

The bigger-than-expected drop in new home sales could be an indication that the nation's housing market is beginning to slow, but reports so far are mixed. On Monday, the National Association of Realtors said sales of previously owned homes rose by 2 percent in August to 7.29 million units, the second-highest level on record.

The 9.9 percent decline in new-home sales was more than double what analysts had been expecting. The government also revised the July sales pace lower, to an annual rate of 1.37 million units, still a 5.3 percent increase from June.

The decline in sales in August was the biggest drop since a 10 percent fall in November 2004.

Some economists think that rising mortgage rates are finally starting to affect the housing market. They are still forecasting that sales this year will set all-time highs, the fifth straight year that sales of both new and existing homes will have set records.

But analysts are forecasting a slight decline in sales for 2006, with prices moderating and possibly even declining in some of the hottest markets.

Federal Reserve Chairman Alan Greenspan has been raising concerns about what a cooling housing market might do to the country's banks and overall economy.

In a speech Monday to a convention of the American Bankers Association, Greenspan warned that the growing use of more exotic mortgage products such as interest-only loans could expose borrowers and banks to "significant losses."

Greenspan's concern is that borrowers who made only small down payments to buy their homes could have loans for more than the value of the home if prices decline, putting them at risk if they have to sell.

But Greenspan also said, "The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in home prices."

A worker puts flashing on the chimney of an already-sold new home in Santa Clarita, Calif.