Low interest rates and affordability continued to be keys to a strong housing sector during the second quarter of 1998, which will be "a banner year if the current level of activity continues," according to the August issue of U.S. Housing Market Conditions.

Existing home sales, which continue to set new monthly records, reached a seasonally adjusted annual rate (SAAR) of 4,773,00 homes in the second quarter, 2 percent ahead of the first quarter. New home sales increased 6 percent to 909,000 (SAAR). June's sales set a new record and June was the 10th month in a row with sales of more than 800,000 homes (SAAR). Housing production in the second quarter was off slightly compared with a very vigorous first quarter but was significantly ahead of 1997's second quarter. Other highlights of the report include:

• Median prices for new homes decreased 3 percent over the quarter to $147,900, and the average price decreased 1 percent to $178,900, making housing more affordable.

• Builders were upbeat. The National Association of Home Builders' Housing Market index rose to 69, reflecting a 4-point improvement in the views of builders regarding current sales, future sales, and prospective buyer traffic. June's index rose to a record-setting value of 71.

• All regions reported increases in building permits for single-family homes during the first half of the year compared with the same period last year.