NEW YORK (CNN/Money) - Rising interest rates will put a brake on home sales in coming years, but steady economic growth and low unemployment should keep housing prices from slipping, a forecast said Thursday.

The Mortgage Bankers Association said it forecast existing home sales of 6.14 million homes in 2005, down from the record 6.68 million reported earlier this week by the National Association of Realtors in 2004, but just ahead of the previous record of 6.10 million set in 2003.

The MBA forecast then calls for 5.70 million existing homes to be sold in 2006 and 5.61 million in 2007, when it sees the average 30-year mortgage rate climbing to 7.0 percent the second half of the year.

"Coming off a fairly steady rate environment in 2004, these are very modest interest rate increases for the level of economic growth we are expecting," said Doug Duncan, the group's chief economist.

Still the slowdown in sales would represent a 16 percent decline in existing home sales from 2004 through 2007.

New home sales are also expected to fall, from an estimated 1.19 million last year to 1.12 million in 2005, 1.01 million in 2006 and 976,000 in 2007. That would equal an 18 percent drop in new home sales over those three years.

But while some economists have worried the current home prices and sales pace represents a market bubble that could burst, causing a rapid loss in value, the Mortgage Bankers forecast projects continued year-over-year gains in home prices, though it is forecasts some modest quarter-over-quarter declines in housing prices, particularly in the winter quarters.

Still even if the group doesn't see an overall decline in housing prices nationwide, Duncan said it could not rule out a drop in prices in some markets, particularly near the nation's two coasts.

"There is no national bubble. We're sort of calling it the 'Don Ho' phenomenon, where there are Tiny Bubbles," he said.

Overall the group forecasts a median existing home sales price of $206,300 in 2007, up 13 percent from the 2004 median price, and the median new home price rising 10 percent to $234,800. Median is the point at which half the homes purchased are more expensive and half are less expensive.

Part of the support for housing prices is an employment rate in the range from 5.2 percent to 5.5 percent each quarter during the three-year period forecast, and gross domestic product growth of between 3.5 and 3.6 percent throughout the period. It also forecasts relatively low inflation levels.