The decline was less steep than private economists’ forecasts of 6.61 million units, but still a sign of economic cooling as higher mortgage rates dampen the housing market.

Sales of existing homes fell 6.6 percent from a year ago.

Inventories rose 5.5 percent at the end of May to 3.60 million units, which represents a 6.5-month supply at the current sales pace.

Home prices rose at near-normal rates, the real estate group said.

The median sales price was 230,000 dollars in May, 6.0 percent higher than the price of 217,000 dollars in May 2005.

“Overall price appreciation has returned to normal levels as the supply of homes on the market has risen to a balanced range,” said David Lereah, chief economist for the real estate group.

Regionally, existing home sales in the West and the South edged higher, while in the Midwest and Northeast they dropped.

“Theres now a clear pattern of slower home-sales activity in many higher cost markets, which are more sensitive to rises in interest rates, and higher home sales in moderately priced areas which have experienced job growth,” Lereah said.

“Although mortgage interest rates remain historically low, the uptrend in interest rates this year is affecting those buyers who are at the margins of affordability.”

The Federal Reserve is monitoring housing data for signs that its rate-hiking cycle is curbing inflation but not hurting economic growth.

The Fed is expected to raise interest rates for the 17th straight session in a row Thursday. Markets are expecting at least a quarter-point hike, but odds are growing that the Fed will continue to tighten credit.

Thomas Stevens, a builder from Vienna, Virginia, who is president of the real estate group, stressed the current “healthy” level of home sales.

“We didnt break the six-million sales barrier until 2003, so the current level of home sales is still pretty healthy by historic standards,” he said.

The report bolstered recent indications of an orderly cooling of the property market, including a Commerce Department report Monday of a sharper than expected 4.6 percent rise in new home sales last month.

SOURCE: AFP