Sales of existing homes slowed slightly in May but still came in at the second-highest level on record, with home prices hitting an all-time high.

Sales of previously owned homes and condominiums edged down 0.7 percent last month, the National Association of Realtors reported yesterday. The small decline left sales at a seasonally adjusted annual rate of 7.13 million units, down only slightly from the 7.18 million sales pace in April, an all-time high. Even with the small drop in sales, home prices rose to a record $207,000 nationally for the median price, the point where half the homes sold for more and half for less.

The new report is unlikely to ease concerns that the housing market in some parts of the country has caught a speculative fever similar to that of the stock market in the late 1990s.

Federal Reserve Chairman Alan Greenspan, while discounting the possibility of a national housing bubble, has talked of "froth" in local markets that have seen sizable run-ups in prices in the past year. He has also expressed concerns that home buyers are using mortgages that let them buy more expensive homes with a smaller down payment, leaving them vulnerable if prices do fall sharply.

David Lereah, chief economist of the Realtors group, said he too was concerned about the use of interest-only mortgages and other mortgages offered with low down payments.

"I worry about a high level of questionable loans in those bubble areas. That could make those markets more fragile," Lereah said.

In Northern Virginia, the inventory of homes for sale in May was up, and prices generally were still climbing, said Amy Ritsko-Warren of the Northern Virginia Association of Realtors. "While it may be a little bit easier for people to get into a house -- there may not be quite as many multiple bids as in April and March -- they still are paying more," she said.

In the District and Montgomery County, "it's still intense but not quite as intense as it was in April," said Susann H. Haskins, president of the Greater Capital Area Association of Realtors and a broker at Long & Foster Real Estate's Potomac office.

The housing market nationally is on track to post another record year in sales of both existing and new homes. Analysts had predicted a slight decline in activity this year after sales of new and existing homes set records for four straight years.

Sales have confounded experts because mortgage rates have stayed near rock-bottom levels. Normally, mortgage rates and other long-term rates would be rising, reflecting the year-long effort by the Federal Reserve to boost short-term interest rates to control inflation.

Instead, mortgage rates have fallen for most of this year, and financial markets have kept long-term rates low, a development that Greenspan has labeled a "conundrum."

Freddie Mac reported in its weekly survey that the average rate on a 30-year fixed rate mortgage declined to 5.57 percent this week, the 10th drop in the past 12 weeks.

"This market is red hot," Lereah said. He predicted sales would remain strong through the summer, as mortgage rates rise only gradually from near historic lows.

Washington Post staff writer Sandra Fleishman contributed to this report.

Home prices hit a record in May. The median sales price rose to $207,000 nationally.