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U.S. house prices still have room to fall, according to a report on real estate trends issued by Scotiabank economists.

The report notes that while the rate of decline has moderated since the spring, sales in the month of June fell to 5.4 million units, a 35% decline since prices hit their peak in 2005.

"The potential for a meaningful turnaround in home sales is limited when..."

Freddie Mac issued its monthly "outlook" for the month of July as well as a round-up of the first half of 2006. While the report still projects a housing market that is undergoing a "moderate and orderly cooling," a comparison to the January outlook shows a slight decline in optimism.

Freddie harkened back to one year ago to the first quarter of 2005 when home values were growing at a rate of 15.4 percent, home sales that quarter hit a record of 8.48 million (annualized) in the quarter, and 30-year fixed mortgages, while on the rise, still averaged 5.7 percent. "A year later, the second quarter numbers for 2006 are more moderate as expected. The summer of 2005 signaled a turning point in housing activity" from a "metaphoric heat wave" to a more reasonable pace.

Noting that the economy is sending and receiving mixed signals that are....