Existing home sales rose for a second straight month in July, a real estate trade group said yesterday, but analysts predicted a slowdown because of rising mortgage rates linked to the crisis in the Persian Gulf.

''Iraq's craziness will be felt in U.S. housing markets,'' said Norman D. Flynn, president of the National Association of Realtors. He said mortgage rates reversed a downward course after the Aug. 2 Iraqi invasion of Kuwait and jumped back into double digits.

In addition to the discouraging higher rates, ''a war situation causes consumer confidence to fall,'' said Richard Peach, deputy chief economist for the Mortgage Bankers Association. ''People become unwilling to take on major responsibilities like buying a new house.''

The Realtors association said house resales rose 3.3 percent to a seasonally adjusted annual rate of 3.44 million units in July following a 0.9 percent gain in June. The June advance was the first in seven months.

The interest-sensitive housing industry has been wracked by high mortgage rates. But after peaking at 10.67 percent in March, fixed-rate 30-year mortgages fell to 9.98 percent by the end of July, according to the Federal Home Loan Mortgage Corp.

''Home buyers watched rates keep drifting down and started making their move,'' Flynn said.

''The rate drops brought in some borderline buyers who were priced out of the market earlier this year, as well as buyers who could have bought sooner, but chose to wait out the rate increases.''

But by last Friday, rates had moved up to 10.29 percent and Flynn said the higher mortgage costs will push down sales this month.

Existing home sales represent more than 80 percent of the housing market. Figures on new home sales in July will be reported by the Commerce Department tomorrow.

The Realtors association said the median price of an existing home in July was $98,400, up 0.9 percent from June. The median price means half of the homes cost more and half less.

In the Northeast, where sales have been depressed for months, home sales increased 14.3 percent to an annual rate of 560,000 units in July.

''July's buildup in resales {in the Northeast} was the result of greater activity in the lower price ranges,'' said John A. Tuccillo, the association's chief economist. ''Sellers have adjusted their prices to fit a buyer's market and buyers have responded.''

The median price in the Northeast was $143,300 in July, down 3.4 percent from the June level.

Sales also rose in the South, up 6.9 percent to 1.4 million units. The median price there rose 1.6 percent to $88,900.

Tuccillo said the resale increase in the South reflected rising activity in the Southwest, where several oil-dominated markets are springing back.

Sales fell 10.3 percent, to 520,000 units, in the West. The median price there was $141,500, up 2.5 percent from the previous month.

Tuccillo said a slowdown in the West was inevitable, considering the extremely heavy sales and price spikes that occurred last year.

Sales also fell in the Midwest, down 3.1 percent to 930,000 units. The median price there was $76,300, up 0.5 percent from June.