WASHINGTON - Sales of existing homes in the U.S. are forecast to decline to a five-year low in 2007, a trade group for real estate agents said Tuesday, and the outlook for 2008 is worsening.

The ninth-straight downwardly revised monthly forecast from the National Association of Realtors calls for U.S. existing home sales to fall 12.7 percent this year to 5.66 million, down from 6.48 million last year.

Last month, the association predicted a 10.8 percent drop from a year ago.

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This year's sales would be the lowest since 2002, when sales hit 5.63 million. The Realtors group forecasts sales will rise slightly next year to 5.69 million, but that is down from last month's prediction of 6.12 million.

The trade group's chief economist, Lawrence Yun, said the housing market is likely to experience a "modest" recovery next year as mortgage markets stabilize.

"It is possible for even higher home sales activity than we're forecasting if buyers regain their confidence," he said in a prepared statement.

The trade group also said its index that forecasts near-term home sales inched upward in September. The trade group said its seasonally adjusted index of pending sales for existing homes rose 0.2 percentage points from August , but was down 20.4 percent from a year ago.

September's reading of 85.7 came after the index hit a record low in August.

The pending home sales index is designed to predict sales levels over the following two months. A reading of 100 is equal to the average level of pending sales activity in 2001, when the index began.

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