WASHINGTON - Existing-home sales this year will drop only 3.5% below last year's record, despite recent indications of a slowing housing market and economy, the chief economist of the National Association of Realtors predicted.

David Lereah forecast sales of 5.02 million units. "We now think this will be the second-best year ever for existing-home sales, given the more favorable interest rate climate and continued strong demand," he said in the trade group's latest Real Estate Outlook.

New-home sales are forecast to drop 6.9%, to 844,000 units, and housing starts 5%, to 1.59 million.

Rates on 30-year fixed mortgage will decline to 7.75% by yearend, Mr. Lereah predicted. "With the Fed holding steady on short-term rates, tame inflation numbers, and strong productivity, mortgage interest rates may gradually decline over the next few months," he said.

The trade group predicted a national median price of $137,200 for existing homes this year, 3.2% more than in 1999, and $163,100 for new homes, up 2.3%.

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