* Seasonally adjusted housing prices down 0.7 pct m/m
* Year-on-year up 6.3 pct vs 8.3 pct one month ago
* 2017 prices now seen up 5-6 pct vs previous view 9-11 pct (Adds quotes, economist, background, detail)
OSLO, July 5 (Reuters) - Norwegian seasonally adjusted housing prices fell by 0.7 percent in June from May, the second consecutive monthly decline, as the cost of buying a home continues to ease from recent record highs, a real estate industry association said on Wednesday.
Unadjusted prices fell by 1.6 percent in June from May. On a year-on-year basis prices rose by 6.3 percent in June, below the 8.3 percent seen in May and down from 13 percent seen as late as February, Real Estate Norway (REN) said.
Tighter mortgage regulations, lower population growth and a boom in construction, flooding the market with new homes, have all contributed to the recent market turnaround.
The association now believes the average price of a Norwegian home will grow by 5-6 percent in 2017, below a forecast made last December of a 9-11 percent increase, it added.
"We expect a nearly flat market throughout the (rest of the) year, with a small decline in nationwide prices," REN Chief Executive Christian Dreyer told reporters.
There were big regional differences, with the capital Oslo recording the most abrupt decline of 3.1 percent in June alone. Dreyer said prices in Oslo will likely continue to fall, albeit at a slower pace.
He blamed the abrupt change in sentiment on a tightening of mortgage regulations by authorities, which took effect at the start of 2017 and are stricter for Oslo than the rest of the country.
"There's no drama in this, following a rise of 40 percent in the previous two years (combined) in Oslo. Uncertainty is big due to more housing starts ... but the Norwegian economy is doing well," Dreyer added.
A decline in housing prices will likely contribute to keeping the central bank's key policy interest rate at record lows, most economists say.
"We must however see a lasting and widespread downturn before (the central bank) starts to fear the negative effects from the housing market on growth and consequently before it affects rates significantly", Nordea economist Erik Bruce wrote in a note to clients.
The housing data was compiled by Real Estate Norway, FINN and Eiendomsverdi. (Reporting by Ole Petter Skonnord, editing by Terje Solsvik)