July 25 (Bloomberg) -- Home resales in the U.S. fell for a fourth straight month in June, a sign housing remained mired in the worst slump in 16 years going into the second half.

Purchases last month declined 3.8 percent to an annual rate of 5.75 million, the slowest pace since November 2002, from a revised 5.98 million in May that was less than initially reported, the National Association of Realtors said today in Washington.

Rising borrowing costs are discouraging buyers, leaving a glut of unsold homes on the market and dimming prospects for a quick recovery in housing. Federal Reserve policy makers last week trimmed their economic growth forecast amid persistent weakness in home building.

``There's no evidence we've hit bottom yet in home sales,'' said James O'Sullivan, senior economist UBS Securities LLC in Stamford, Connecticut, who correctly forecast the June sales pace. ``The housing recession continues. There may be spillover into consumer spending yet to come.''

Resales were forecast to fall 2.1 percent to a 5.86 million annual rate from a previously reported 5.99 million in May, according to the median estimate of 73 economists in a Bloomberg News survey. Estimates ranged from 5.45 million to 6.12 million.

Sales last month were down 11.4 percent from a year earlier.

Homes for Sale

The supply of homes for sale fell 4.2 percent to 4.2 million, the first decline in inventories this year. At the current sales pace, that represented 8.8 months' worth, the same as at the end of the prior month.

``The inventory numbers are encouraging,'' O'Sullivan said. ``I wouldn't celebrate yet, though, because sales are still falling.''

The median price of an existing home rose 0.3 percent last month from a year ago to $230,100, the first increase from year- earlier levels in 11 months, the Realtors group said.

Yesterday Countrywide Financial Corp., the biggest U.S. mortgage lender, cut its profit forecast as a growing number of homeowners fell behind on home-equity loan payments. Chief Executive Officer Angelo Mozilo told investors on a conference call that he expects ``difficult housing and mortgage market conditions to persist'' through the end of the year.

Resales of single-family homes fell 3.5 percent to an annual rate of 5.01 million. Sales of condos and co-ops fell 6.3 percent to a 740,000 rate.

Regional Breakdown

Purchases fell 7.3 percent in the Northeast, 6.8 percent in the West, 2.8 percent in the Midwest and 1.7 percent in the South.

The government is scheduled to report tomorrow on new-home sales. The Commerce Department report may show a 2.7 percent decline for June, according to the median forecast in a Bloomberg survey.

Monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier, while new-home sales are recorded when a contract is signed. Sales of existing homes account for about 85 percent of the U.S. housing market, and new-home sales make up the rest.

Residential investment has subtracted from economic growth the past six quarters, and prospects for significant improvement are still distant, economists said. Home building last year subtracted about 0.3 percentage point from gross domestic product, the most since 1991, according to government figures.

Fed's Outlook

The housing outlook prompted the Fed this month to reduce its estimates for economic growth.

``The ongoing correction in the housing market seems likely to continue to weigh on the rate of economic expansion over the near term,'' the Fed said in its semiannual monetary policy report to Congress on July 18.

The economy will grow by 2.25 percent to 2.5 percent in the fourth quarter of 2007 from a year before, compared with a range of 2.5 percent to 3 percent given in February, the Fed said in its report to Congress. The economy will strengthen next year as the drag from housing starts to diminish, the Fed said.

The Realtors reported earlier this month that Americans signed fewer contracts to buy previously owned homes in May. The group's index of signed purchase agreements, or pending home resales, dropped to the lowest level in more than five years.

Economists have been trimming their forecasts for home sales as mortgage rates creep higher and defaults rise among subprime borrowers, or people with poor or scant credit histories.

Mortgage Rates

The average rate on a 30-year fixed mortgage in June rose to 6.66 percent from 6.26 percent in May and 6.18 percent in April, according to Freddie Mac.

The supply of homes at May's sales pace represented 8.9 months' worth, the highest since June 1992.

The Realtors' group on July 11 reduced its sales forecast for the seventh consecutive month, projecting existing home sales to fall 5.6 percent to 6.11 million in 2007. Prices will drop 1.4 percent, the group said.

A drop in building permits to the lowest level in a decade in June pointed to a deteriorating outlook for future construction, the Commerce Department reported July 18.

``The difficult conditions that plagued the homebuilding industry in the first quarter of 2007 worsened in the second quarter, with increased competitive pricing pressures, elevated levels of new-and-resale home inventory, and weak consumer sentiment for housing affecting the entire industry,'' said Richard Dugas, chief executive officer of Pulte Homes Inc., the third-largest U.S. homebuilder by revenue.

Dugas made the remarks in a statement on July 17, when the Bloomfield Hills, Michigan-based builder said orders last quarter fell 20 percent.

To contact the report on this story: Joe Richter in Washington at jrichter1@bloomberg.net

Last Updated: July 25, 2007 10:17 EDT