WASHINGTON( CBS/AP) December 24, 2008 — Sales of existing homes plunged far more than expected last month as buyers recoiled from October's financial wreckage on Wall Street. The median sales price fell by the largest amount on record.

The National Association of Realtors said Tuesday existing home sales fell 8.6 percent to an annual rate of 4.49 million in November, from a downwardly revised pace of 4.91 million in October.

Sales had been expected to fall to a pace of 4.9 million units. according to Thomson Reuters.

"We still have a housing market that's well over-supplied, especially in the existing home market," real estate analyst Mike Larson told CBS News Radio. "Demand continues to remain weak because of slumping confidence, tightening lending standards and rising unemployment."

The median sales price plunged 13.2 percent in November to $181,300, from $208,000 a year ago. That was the lowest price since February 2004, the biggest year-over-year drop on records going back to 1968 and most likely the biggest drop since the Great Depression.

Lawrence Yun, the normally upbeat chief economist of the Realtors group, found few positive spots in the month's dismal data. But he did note that after prior stock market crashes home sales usually rebounded within a few months.

"We hope that, similarly, the current slowdown in home sales activity is a short-term phenomenon," Yun said, noting that people in the real estate industry are "crossing our fingers" that the market will recover. Sales fell around the country, with the largest drop - of 12 percent - in the Northeast.

But other analysts see the trend continuing into the New Year, with the government able to do little to reverse it.

"It's a little biti of an uphill battle for policy makers and I think that the overall outcome is for housing to continue to remain weak and be a little bit of a lead anchor here as we head into 2009," Larson told CBS News Radio.

Meanwhile, the Commerce Department reported Tuesday that new home sales dipped 2.9 percent to a seasonally adjusted annual sales pace of 407,000 units. That was a weaker performance than economists had expected and was the slowest sales pace since January 1991.

The median price of a new home sold in November was $220,400, a drop of 11.5 percent from the sales price a year ago. That was the biggest year-over-year price decline since a 12.7 percent fall in March of this year. The median is the point where half the homes sold for more and half for less.

The Commerce Department also reported Tuesday that the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 percent in the July-September quarter, while corporate profits fell 1.2 percent.

The fall in GDP was unchanged from an estimate made a month ago. The decline in corporate profits was slightly larger than the 0.9 percent fall estimated a month ago.

Analysts believe that GDP, the economy's total output of goods and services, is falling at an even sharper pace in the current quarter, reflecting the fallout from the worst financial crisis to hit the country since the Great Depression.

Some believe the GDP plunge could be as large as 6 percent in the current October-December quarter, which would make it the largest decline since a 6.4 percent drop in the first quarter of 1982.

Many economists think this quarter could mark the low point of the recession, which is already the longest in a quarter century, having started in December 2007.

They are forecasting smaller GDP declines in the first and second quarter of next year before the economy starts growing again next summer. If the recession ends in June 2009, as many economists are forecasting, it would have lasted 18 months, making it the longest recession in the post-World War II period.

"I think that there's a bit of a relief out there that the worst of the panic is over," Diane Swonk, chief economist at Mesirow Financial, told CBS News Radio. " Unfortunately, that panic had real economic consequences and we still have to deal with that."

The 0.5 percent drop in GDP in the third quarter followed a 2.8 percent increase in the spring, a period that was boosted by the distribution of millions of economic stimulus payments.

President-elect Barack Obama favors a massive second stimulus measure of around $850 billion, which Obama is pushing Congress to pass early next year to limit the severity of the downturn.

For the government's last look at third quarter GDP, there were only minor revisions. Spending by consumers plunged at an annual rate of 3.8 percent, slightly larger than the 3.7 percent fall reported a month ago. It was the biggest decline in consumer spending, which accounts for two-thirds of economic activity, in nearly three decades, since an 8.6 percent drop in the second quarter of 1980.

Residential construction, where the current economic troubles began, fell at an annual rate of 16 percent in the third quarter, while non-residential construction, which had been buffering the construction industry, faltered as well, dropping by 1.7 percent.

The 1.2 percent fall in corporate profits followed a 3.8 percent drop in the spring and represented the fifth straight quarter that corporate profits have fallen.

The National Bureau of Economic Research has said that the country slipped into a recession in December 2007. In the October-December quarter of 2007, the GDP was falling at an annual rate of 0.2 percent. GDP then grew by 0.9 percent in the first quarter and 2.8 percent in the second quarter before falling by 0.5 percent in the third quarter.

While the common rule of thumb for a recession is two consecutive quarters of falling GDP, the NBER uses other data to determine when recessions begin and end including employment statistics. The economy has lost jobs every month since January, shedding 1.9 million payroll jobs this year, including more than a half-million jobs lost in November alone. The unemployment rate now stands at a 15-year high of 6.7 percent.

Congress enacted a $700 billion rescue program in October, and the Federal Reserve has expanded its loan programs by hundreds of billions of dollars as the government has tried to combat the credit crisis. But all those efforts have so far failed to prompt banks to resume more normal lending patterns.

As a consequence, many businesses are struggling to attract the financing they need. The weakness is spreading around the world, which has been bad for U.S. exports.

Peoria, Ill.-based Caterpillar, Inc,, the world's largest maker of mining and construction equipment, said Monday that it would cut executive compensation by up to 50 percent next year due to slower demand amid the global economic downturn, becoming the latest of several large firms to slash compensation in an effort to lower costs.

Earlier this month, Memphis, Tenn.-based FedEx Corp. said it would cut pay for senior executives and freeze 401(k) contributions for a year, while AK Steel Holding Corp. of West Chester, Ohio, said it planned to reduce pay for salaried employees by 5 percent in 2009.

The recession already is the longest since the 1981-82 slump, which lasted 16 months.