WASHINGTON (AP) – After a five-year boom, the nation’s housing market cooled considerably in 2006 with existing home sales falling by the largest amount in 17 years.

While the worst may be over, the rebound could be slow in coming, analysts said, given a continuing huge backlog of unsold homes that will keep downward pressure on prices, particularly in former boom areas.

The National Association of Realtors reported Thursday that sales of existing homes totaled 6.48 million units for all of 2006, down 8.4 percent from 2005 when 7.08 million existing homes were sold, the fifth straight year that sales hit an all-time high.

That boom drove prices up at double-digit rates and caused a stampede of investors into the market who purchased housing hoping to quickly sell the homes for big profits.

David Lereah, chief economist for the Realtors, said that 40 percent of home sales in 2005, the peak of the housing boom, represented purchases by investors and people buying vacation homes.

“A lot of those people have now left the market,” Lereah said, predicting that sales have bottomed out and should start a slow rebound in 2007.

“With fingers and toes crossed, it appears that we have hit bottom in the existing home market,” Lereah said.

However, other analysts cautioned that the rebound will likely be extremely slow because it will take time for unsold inventories to be worked down and for speculators to unload homes they purchased hoping for a quick profit.

“Last year was a tough year for housing and 2007 will be difficult as well,” said Mark Zandi, chief economist at Moody’s Economy.com. “Sales are near a bottom, but prices and new home construction will continue to fall throughout most of this year. I don’t expect the market to show broad improvement until 2008.”

Even with the sales decline in 2006, the median price of a new home managed to rise slightly last year to $222,000, compared to a median, or midpoint price, of $219,600 in 2005. However, the 1.1 percent price increase last year was far below the 12.4 percent price surge in 2005.

Analysts said prices are likely to continue falling in such formerly red-hot markets as California, Florida, Arizona, Nevada and the Northeast corridor.

“There was an unprecedented boom in housing that created a lot of imbalances that have to be righted before the market revives,” Zandi said. “We have gone from boom to bust and the bottom is here to stay at least until this time next year.”

For December, sales of existing homes fell by 0.8 percent to a seasonally adjusted annual rate of 6.22 million units. Analysts had been hoping for a small increase after sales gains in October and November, the first back-to-back increases since the spring of 2005.

The median sales price in December was unchanged at $222,000, the same as December a year ago, which represented an improvement after four straight months in which the median sales price had fallen compared to the same month a year ago, the longest stretch of such declines on record.

The slowdown in housing has been a major factor dragging down overall economic growth, trimming more than a percentage point from growth in the July-September quarter, when the economy expanded at a lackluster 2 percent growth rate.

Still, economists are growing more confident that the housing bust will not be severe enough to push the economy into an outright recession, as job growth outside of housing-related industries has remained strong, helping to bolster consumer spending.

By section of the country, sales in December were down the most in the West, a drop of 9.1 percent, and the Northeast, where sales fell by 2.8 percent. Sales rose by 4.3 percent in the Midwest and 0.8 percent in the South.

For the entire year, sales were down in all regions of the country, dropping 19.6 percent in the West, 7.2 percent in the Northeast, 6.6 percent in the Midwest and 5.1 percent in the South.

In December, the inventory of unsold homes fell by 7.9 percent to 3.51 million units, which represents a still-high 6.8 month supply at the December sales pace.

In other economic news, the Labor Department reported that the number of newly laid off workers filing claims for unemployment benefits rose to 325,000 last week, an increase of 36,000, which was the biggest one-week jump since the hurricane-related layoffs in the fall of 2005.

However, analysts said that the big increase followed two weeks of bigger-than-expected declines and probably was not a signal of a weakening labor market.

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On the Net:

Existing home sales: http://www.realtor.org

Jobless claims: http://www.ows.doleta.gov