WASHINGTON - U.S. home sales and housing construction will fall next year because of mortgage interest rates approaching 8%, the National Association of Realtors said.

Sales of existing homes will decline 5.1%, to 4.91 million units, from the record 5.18 million expected this year, James Smith, chief economist, said Tuesday in the association's annual economic forecast. Sales of new homes are expected to fall 4.9%, to 848,000, from this year's expected record of 928,000.

Housing starts also are expected to drop, by 3.6%, to 1.61 million units, from 1.67 million this year. This year's expected total would be the highest since 1986. Since construction and sales volumes were so high this year, a decline in 2000 would be far from disastrous, Mr. Smith said.

"Things are good; they are going to stay good," he said at a press conference. The predicted sales of previously owned homes would still make 2000 the third-best year ever.

The average rate for a 30-year mortgage rose to 7.86% last week, more than a full percentage point higher since January.

- Bloomberg News

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