WASHINGTON (Reuters) -- Next year will likely bring a second annual decline in existing home sales, the National Association of Realtors predicted Monday.

Sales of existing homes are expected to decline 8.6 percent to 6.47 million for 2006 and contract another 1 percent to 6.40 million units next year.

Still, the housing sector should see a rebound by the end of next year, said David Lereah, the association's chief economist.

"By the fourth quarter of 2007, existing-home sales will be 4.6 percent higher than the current quarter," Lereah said.

Sales of new homes should fall a sharp 17.7 percent this year and another 9.4 percent next year, the Realtors said.

About three-quarters of the country will see a sluggish expansion of existing home sales next year, Lereah said.

The health of housing markets across the country will vary, he said, but "general gains in value next year will be modest by historic standards."

In the last three months of 2005, homes across the nation were appreciating at a 12 percent rate, according to the Office of Federal Housing Enterprise Oversight. From July to September this year, home price appreciation had slowed to a 3.5 percent rate.

Lereah also predicted that 30-year mortgage rates would increase to 6.7 percent by September. Those rates were at 6.11 percent last week, mortgage finance company Freddie Mac reported.

With a slowdown in the housing market near a bottom, homebuilders such as (up $0.27 to $31.57, ), (up $0.12 to $33.45, ), (up $0.13 to $52.42, ), (down $0.02 to $51.52, ) and (up $0.05 to $26.72, ) have all seen their profits fall sharply, with many lowering their forecasts.

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