Sales in southern states were down 22.1%, whereas sales contracts in the west were 2% higher than in May 2007.

Lower prices were attracting some buyers back into the market, the NAR said, but the downturn is expected to continue for some months to come.

"You are going to see this trend for a while," said Bob Moulton of American Mortgage Group.

"People are nervous about their jobs, they are nervous about getting [a mortgage] approved and they are nervous about paying too much for a house."

There were, however, positive signs from Colorado and California where estate agents reported double-digit growth in Colorado Springs and Sacramento.

"Some markets have seen a doubling in home sales from a year ago, while others are seeing contract signings cut in half," said NAR chief economist Lawrence Yun.

The sales of new homes have been particularly badly hit, with sales expected to be almost a third lower this year compared with 2007.

Source: BBC News