US home sales near a six-year low

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Pending sales of existing US homes fell in May to the lowest level in almost six years, new figures have shown.

The National Association of Realtors said its index of pending home sales fell by 3.5% in May to 97.7, its lowest level since September 2001.

With the US housing market now in a slump since last year, it has been a major drag on the American economy.

Separately, US factory orders fell 0.5% in May, although this was a smaller dip than economists had expected.

Sub-prime woes

As the US housing market has faltered over the past year in the face of higher interest rates, home repossessions have hit a record high.

I do not see a bottoming in the housing market Morgan Stanley economist Kevin Flanagan

The sub-prime mortgage market, which specialises in offering high-interest loans to low-income or higher-risk borrowers, has also all but collapsed.

This has led to banks having to bail out a number of sub-prime lenders.

"I do not see a bottoming in the housing market, said Morgan Stanley economist Kevin Flanagan.

"There is not a light at the end of the tunnel."