The U.S. Commerce Department says sales of new homes dropped 26 percent last year, the sharpest fall since records began in 1963.

Economists say the figures released Monday show the weak U.S. housing market continues to deteriorate.

The government report says the annual rate of new-home sales in the U.S. declined to 604,000 last month from a downwardly revised rate of 634,000 in November.

The median price of new homes fell 10.4 percent in December from a year earlier, the biggest such drop in 37 years.

The report says that at this pace, it will take more than nine months to sell all of the currently unsold new homes.

The housing slump and a credit crunch in the financial sector have raised fears that the U.S. economy could slide into a recession.

The U.S. Federal Reserve cut interest rates by three-quarters of a percent last Tuesday in a surprise move to boost the economy. Economists expect it to make a further reduction in borrowing costs at a two-day meeting that ends Wednesday.

Some information for this report was provided by AFP, AP and Reuters.