Yesterday we saw a dramatic drop in previously owned home sales, which caused the stock market to fall, and economic worries to rise a bit. Today we got the latest numbers from the Commerce Department on sales of newly built homes, and they were almost as dismal as yesterday’s numbers. New home sales dropped 12.4% in July, to a new record low. The main reason for the drop is the fact that the home buyer tax credit that the government was giving away toward new home purchases, expired.

The drop was not expected by most economists who had predicted 334,000 new homes to sell in July. The actual number came in much lower at just 276,000. This likely is not the end of the pain in the housing market. Mitchell Hochberg, of Madden real Estate says, “With shadow inventory, rising foreclosures, little job growth and more stringent access to credit, weak sales will persist and the industry’s headache will linger.”

A rebound in the housing market is seen by economists as a key variable in the overall economy’s recovery. Having said this, until the unemployment rate falls, the housing market will remain very weak. Regionally, the largest sales drop was seen on the West Coast, while the South and Midwest saw only 8% drops in new home sales.