HEADLINE-GRABBING house price inflation may be creating unrealistic expectations among sellers - and deterring buyers from coming into the market, says the National Association of Estate Agents.

The results of the NAEA's October Housing Market Survey indicate that, while a continuing shortage of supply is currently keeping prices buoyant, an average 26 per cent fall in the number of applicant inquiries from September's figures will have a stabilising effect on transaction levels.

The average number of first-time buyers coming into the market fell by just two per cent during October, while stock levels are reported as having fallen by five per cent.

In addition, while some agents are saying there have been healthy levels of business, the picture varies significantly in different parts of the country.

NAEA chief executive, Hugh Dunsmore-Hardy, said: "Our members are in the front line in the market and their current experiences can be read as a clear forecast that activity within the market is stabilising from the heady levels we saw earlier this year."

According to respondents, house prices on sales agreed were hovering on average just under 20 per cent higher than a year ago.

This is a more conservative figure than some recent reports which may, say the NAEA, be misleading a proportion of homeowners to take an over optimistic view on their asking price.

Julie Westby, NAEA president, said: ''It appears that national headlines may be encouraging some unrealistic expectations, with more homeowners over-riding their agent's advice on asking price.

"Professional estate agents base their market appraisal on a whole host of factors including, location, the desirability of the property and local economic conditions."

• The average number of weeks between instruction and sale agreed has reduced to five, while the average time between sale agreed and exchange of contracts remains unchanged

• House prices are running at 18 per cent higher than in October, 2001

• 19 per cent of buyers did not require a mortgage; a slight increase on the figure for September.