Sales of existing homes set a record for a fifth straight year in 2005 even though the year ended on a weaker note with three straight monthly declines, sending a strong signal that the nation's housing boom is beginning to cool.
The National Association of Realtors reported that sales of previously owned homes and condominiums dropped by 5.7 percent in December compared to the sales pace in November. It marked the third consecutive monthly decline, something that has not occurred in more than three years.
Even with the sales weakness in the last three months of the year, total sales in 2005 climbed to an all-time high of 7.072 million units, up 4.2 percent from the 6.784 million homes and condominiums sold in 2004.
The median price of a home sold in December was $211,000. For all of 2005, home prices were up 12.7 percent, the biggest increase since a 14.4 percent rise in 1979.
David Lereah, chief economist for the Realtors, said he expected price increases to slow this year as sales drop by around 5 percent. He said this would represent a cooling housing market but not a collapse as some analysts had feared.
"This is part of the market adjustment we have been discussing with a soft landing in sight for the housing sector," Lereah said.
In another sign the market may be adjusting, whilesurged to an all-time high in 2005, construction activity fell sharply in December.
By region of the country, existing sales were down 11.4 percent in the West, 7.2 percent in the South and 2.6 percent in the Midwest. The level of sales was unchanged in the Northeast.
Lereah said he expected sales of existing homes to decline by 5 percent in 2006 and expected a similar drop for sales of new homes. He said that the 12.7 percent increase in prices last year would probably slow to a gain of around 5 percent or 6 percent in 2006.