UPDATE 1-Price of US existing homes see record fall

(Recasts, adds details)

WASHINGTON, Sept 24 (Reuters) - Prices of existing homes in the United States suffered a record drop in August while the sales pace slowed and the overstock of homes shrank, the National Association of Realtors said on Wednesday.

The pace of existing home sales decreased 2.2 percent to a 4.91 million unit annual pace while the median national home price declined 9.5 percent to $203,100.

Economists polled by Reuters were expecting home resales to fall to a 4.93 million-unit pace from the July rate of 5.02 million units. The dollar extended losses against the euro after the data.

The realty trade group said in a report that as many as 2 in 5 home sales are by borrowers who have seen their property lose value or are facing foreclosure.

"The big question now is whether lending is so tight that sales are being hurt," said Gary Thayer, senior economist at Wachovia Securities in St. Louis, Missouri. "If we can work through the current lending difficulty, sales are likely to improve later this year."

The inventory of existing homes for sale fell 7.0 percent to 4.26 million from the record-high overstock reported in July.

(Reporting by Patrick Rucker, additional reporting by Ellen Freilich in New York; Editing by Chizu Nomiyama)