US home sales decline yet further

The housing market slump has hit US shares

Concern that US house prices could fall sharply has returned after a key survey showed that sales fell to a near five-year low in the year to July.

Sales of existing homes fell 0.2% to 5.75 million units in the year, the lowest since November 2002, said the National Association of Realtors (NAR).

It marks the first time that the US's main estate agent body had reported a decline in 12 consecutive months.

The figures caused the main US share indexes to end lower on Monday.

While the Dow Jones lost 58 points to 13,321, the Nasdaq slipped 15 points to 2,561.

Meanwhile, the Standard & Poor's 500 index shed 12 points to 1,467.

Last week a separate study said sales of new homes surprisingly rose in July, giving Wall Street a major boost on Friday.

'Downturn intensifying'

NAR added that the supply of unsold single-family homes has now hit its highest level in 16 years.

"This shows that the housing downturn continues to intensify," said Moody's economist Mark Zandi.

"It shows no sign of abating.

"It's a large amount of unsold homes, and it's really weighing on the market."

Concerns over the US housing sector, and the resulting market turmoil of recent weeks, centred on the so-called sub-prime mortgage sector.

This gives higher risk loans to people with poor credit histories.

Sub-prime default levels have risen to record highs over the past year in the face of higher US mortgage rates, raising fears that this could hamper credit availability in the broader market.

Investor confidence was further hit on Monday after Goldman Sachs analyst William Tanona cut his third-quarter earnings forecasts for three firms exposed to the sub-prime slump - Bear Stearns, Lehman Brothers and Morgan Stanley.