New home sales unexpectedly fell to a 9-month low in December ending the year with the industry’s weakest record according to a government issued report.

The Commerce Department said December sales plunged 7.6 percent to a seasonally adjusted annual rate of 342,000 compared to November’s upwardly revised rate of 370,000.

Home sales have had a rocky recovery and December’s sales indicated market demand remains sluggish despite newly expanded tax incentives to spur sales.

Only 374,000 homes were sold last year which is 23 percent from a year earlier and the weakest year since 1963 while last month’s sales were down nearly 9 percent compared to December 2008.

December's sales pace was up 4 percent from the bottom in January 2009, but still down 75 percent from the July 2005 peak.

Sales of new home plunged 41 percent in the Midwest, the largest December decline. In the South, sales fell by 7 percent but surged 43 percent in the Northeast and 5 percent in the West.

The median sales price of $221,300 in December was nearly 4 percent below compared 12-months ago figure of $229,600 but about 5 percent above November's median of $210,300.

The average sales price in December 2009 was $290,600 which was up compared to previous months’ 270,000.

There were 231,000 new homes for sale at the end of December and at the current sales pace it is enough to last 8.1 months. This is the 32nd month of decline and leaves supply at the lowest level since April 1971.