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Last Updated: Monday, 27 February 2006, 16:22 GMT
US sees decline in housing sales
New homes being built in the US
Mortgage rates are taking their toll on the housing market
Sales of new homes in the US dropped for the second time in three months in January, putting pressure on the Federal Reserve to ease interest rates.

The Commerce Department said that sales of new single-family homes dropped by 5% to a seasonally-adjusted rate of 1.23 million last month.

The figures provided further evidence that the five-year housing boom was slowing, analysts said.

They blamed the drop in sales on rising mortgage rates.

January's 5% fall in home sales followed a revised 3.8% rise in December and a 7% drop in November.

Weather factor

However, the average price of a new home rose in January to $238,100, compared with $229,000 in December.

Economists had expected strong home sales after recent figures showed the US had recorded the fastest pace in construction of new houses for more than 30 years.

The Commerce Department's January building activity index rose 14.5%, pushing construction to an annual rate of 2.27 million units.

This was the fastest rate of growth since March 1973, but was expected to be a one-off blip caused by unusually warm weather in January.

Home sales fell in all regions of the US except the West, where they rose by more than 11%. Sales in the south of the US suffered the most, and were down by more than 10%.

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