Confirming what many Street analysts had predicted, existing home sales fell in June, dropping slightly to 6.62 from 6.71 million units annualized in May. Although last month's number is down 9% from the all-time high, set a year ago, and down 6% from the 2005 average, the pace remains high by historical standards. Moreover, the good news is the cooling in housing demand has been gradual and orderly, according to Stephen Stanley, chief economist at RBS Greenwich Capital.

The good news stops there, however, as inventories of unsold homes continue to build and anecdotal reports from builders and realtors suggest that the market has significantly weakened in the last month. "Existing home sales would not reflect such a recent phenomenon because they tend to lag a bit (because they are recorded at contract closing)," Stanley said.

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