June 23 (Bloomberg) -- Lumber prices plunged to an eight- month low after a report showed that new-home sales in the U.S. fell at a record pace in May, dimming prospects for building materials.

“Home sales are down 33 percent, so you have an overall economy issue,” said Dewey Strickler, the president of Ag Watch Market Advisors in Nashville, Tennessee. “For grains or any other commodities to rise, you have to have strong consumer demand, and we don’t really have that.”

Lumber futures for September delivery fell $5, or 2.6 percent, to $187 per 1,000 board feet on the Chicago Mercantile Exchange. Earlier, the price touched $183, the lowest level for a most-active contract since Oct. 9. Lumber has declined 21 percent this year, partly on sluggish demand for building materials.

“Mortgage applications are way down,” said Jamie Greenough, a futures broker at Global Securities Corp. in Vancouver. “There is a big backlog of foreclosures in the U.S., and that kind of inventory overhang has to be addressed.”

--Editors: Patrick McKiernan, Michael Arndt