But the home boom is now showing clear signs of waning -- and analysts say that has worrying implications for consumer spending in the world's largest economy.

Most economists agree that housing demand is likely to slow further in coming months, after recent interest rate hikes and soaring energy prices. But few are predicting the abrupt bursting of an overly inflated bubble.

In the past week, a government report highlighted that the number of unsold new homes on sale across the country swelled to a record high of 566,000 last month.

And on Friday, an International Monetary Fund report said that US property prices were "overvalued", just one of the headaches facing Federal Reserve policymakers.

Homeowners have benefited from double-digit annual rises in their property values to go on a credit-fuelled spending splurge. But now the picture is changing.

"Many individuals, who signed a (purchase) contract in what they had believed was a booming housing market, may now be backing out of those contracts," said Phillip Neuhart, an economic analyst at Wachovia Securities.

"Thus, the new home market is likely weaker than new home sales reflects," he said.

Home builders report that sellers are going as far as giving away cars, free kitchen upgrades and holidays to lure reluctant buyers.

The Commerce Department on Thursday said sales of new US homes declined three percent in June to a weaker-than-anticipated annualized rate of 1.131 million units.

News of the latest sales downturn, and the record number of new homes that are languishing unsold, followed an industry report Wednesday that showed existing home sales fell 1.3 percent in June.

On Friday, the government said that US economic growth slowed to just 2.5 percent in the three months to June as consumers turned nervous in the face of sky-high fuel prices and the cooling property market.

Economists are divided on whether the Fed will raise interest rates further at its August 8 policy meeting, but agree that 17 straight hikes of its key fed funds rate have squeezed the home market and buyers' enthusiasm.

The rate has now gone up to 5.25 percent, adding to the pain for more recent home buyers who took out interest-rate-only mortgages in their rush to get on the property ladder.

University of Maryland business professor Peter Morici said that "recession risks remain real and apparent".

"With the housing market cooling, consumers are no longer able to use the equity in their homes to finance ever-larger purchases of clothes, electronics and other goods and services," he said.

Joel Naroff of Naroff Economic Advisors observed that the number of homes on the market is up an "astounding" 39 percent since June 2005.

"From the huge jump in the housing inventory, it appears that anyone who has any hope of getting out has put their home on the market," he said.

Even housing market representatives say that sellers are no longer commanding the handsome premiums of recent years, as prospective buyers take longer to sign on the dotted line.

"Relative to the five-year housing boom, this year is a buyers' market in much of the country," observed David Lereah, the chief economist of the National Association of Realtors.

The government's latest figures support Lereah's outlook, but prices still remain stratospheric in some hot urban areas.

The median price for a new home fell 1.6 percent last month to 231,300 dollars from May. But buyers in New York, San Francisco and Washington would be lucky to find a family home for sale at double that price tag.