July 11 (Bloomberg) -- U.S. home sales and prices will fall further in 2007 and the housing slump will persist into next year as builders curtail production, the National Association of Realtors said.

The group reduced its sales forecast today for the seventh consecutive month and said existing home sales will fall 5.6 percent to 6.11 million in 2007. Prices will drop 1.4 percent. In 2008, single-family housing starts will probably fall to their lowest since 1995, the Realtors said in a statement.

Stricter mortgage standards, a glut of properties, and interest rates close to an 11-month high will stall sales, said Lawrence Yun, an economist with the group. Next year's building decline will also cut purchases of appliances and home supplies, trimming residential construction spending 1 percent to $495 billion, the lowest since 2002, he said.

``Housing will continue to be a drag to economic growth all the way through 2008,'' Yun said.

Even as construction declines, home sales and prices will probably rise next year, the group said in its forecast. Existing home sales will increase to 6.37 million in 2008, a 4.2 percent gain over this year, after two consecutive annual declines. That's still below the 6.48 million in 2006.

Housing Starts Forecast

Builders probably will break ground on 1.109 million single- family houses next year, 1.3 percent fewer than this year, the trade group said today in its first prediction of a 2008 decline.

The median price for a previously owned home probably will fall 1.4 percent this year to $218,800 and gain 1.8 percent in 2008, the Realtors said. A month ago, they predicted a 1.3 percent drop this year, which would be the first national price decline since the Great Depression, according to Yun.

The Realtors forecast came as Federal Reserve Bank of Philadelphia President Charles Plosser said the housing slowdown is unlikely to curb economic growth next year.

``The consequences of the declines in housing activity and house prices, in my view, have so far not derailed the prospect that economic growth will return toward trend at the end of 2007 and in 2008,'' Plosser said in a speech to the European Economics and Financial Centre in London.

U.S. homebuilders see no prospect of a housing recovery. D.R. Horton, the second-largest builder by revenue, and Ryland Group Inc. yesterday forecast quarterly losses and said orders plunged. Both also plan to take charges to write down land and inventory.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

Last Updated: July 11, 2007 12:50 EDT