Sales of detached homes fell in two of Australia's most populous states according to recent industry data.

The housing industry's overall average fell because of slumping sales in New South Wales and Victoria, according to a report from the Housing Industry Association. Home sales in NSW dropped to 7.8 percent and was only 6.7 percent in Victoria. Nationally, detached new houses dropped 2.4 percent while multi-unit sales rose to 23.3 percent.

Economic slowdown and a rise in interest rates were among the factors that contributed to the weak housing market. General concern over pundits views of an interest rate hike also contributed to low sales. Overall sales of new homes in Australia lessened 0.2 percent in May. House market values are also falling at a much faster rate than during the global financial crisis of 2008 according to a report from the Sydney Morning Herald.

The performance of NSW and Victoria is the result of two opposing trends. Victoria's house market sales come after a record high so any drop should be taken in context of previous market sales. New South Wales is experiencing a slight decline after a steady recovery from low market sales.

According to HIA chief economist Harley Dale the numbers could have been worse nationally if home sales in Queensland hadn't recovered in May. Queensland's home market enjoyed a 19 percent surge even though the state experienced massive flooding in January.

''The number reflects a better month for a few volume builders within which the recovery is coming from levels of sales which are close to all-time record lows. The magnitude of the rise in May is exaggerated, I think,'' he said.

Despite the decline in house sales, there is still some glimmer of hope for the market. Both Victoria and NSW enjoyed rises in sales in the three months leading to May. NSW in particular showed a slow and steady recovery with the last major decline recorded in August 2010 where the sales fell to 20 percent. Victoria experienced the last major decline in July last year where sales dipped to 13 percent. Sales have been increasing in Victoria through the January to April period this year.

''If you look at building approvals, at new home sales and new home lending, all three of those indicators are pointing to a weakening of new home building activity as we go into the new financial year," said Mr. Dale.

''In that sense the update for new home sales is a concerning one for the residential construction sector.''