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The National Association of Realtors (NAR) reports that the seasonally adjusted annual rate of existing home sales in December fell 1% to 4.94 million from a downwardly revised total of 4.99 million in November. Sales are up 12.8% year-over-year for the month of December.

Total existing home sales in 2012 came to 4.65 million, up 9.2% from 4.26 million in 2011 and the highest annual volume since 2007, when sales of existing homes reached 5.03 million. As a percentage, annual sales in 2012 were the strongest since 2004.

NAR’s chief economist said:

The number of potential buyers who stayed on the sidelines accumulated during the recession, but they started entering the market early last year as their financial ability and confidence steadily grew, along with home prices. Likely job creation and household formation will continue to fuel that growth. Both sales and prices will again be higher in 2013.

According to the NAR, the national median existing home price in December was $180,800, up 11.5% compared with December 2011 and the 10th consecutive month to see a price gain.

Foreclosed and short sales accounted for 24% of December sales, up from 22% in November but below the 32% share in December 2011. Foreclosures sold at a 17% discount to the December median price, while short sales sold at a discount of 16%.

Housing inventory at the end of December fell by 8.5% to 1.82 million existing homes and is at its lowest level since May 2005.