The National Association of Realtors said on Tuesday that existing home sales dropped 1.0 percent last month to a seasonally adjusted annual rate of 4.94 million units.
That was still the second highest rate of sales since November 2009, when a federal tax credit for home buyers was due to expire.
Sales were below the median forecast of a 5.1 million-unit rate in a Reuters poll.
The U.S. housing market tanked on the eve of the 2007-09 recession and has yet to fully recover, but steady job creation helped the housing sector last year, when it likely added to economic growth for the first time since 2005.
The nation's inventory of existing homes for sale fell 8.5 percent from November to 1.82 million, the lowest level since January 2001.
Many Americans are holding back from putting their homes on the market because they owe more on their mortgages than their homes are worth. Inventories were down 21.6 percent from December 2011.
At the current pace of sales, inventories would be exhausted in 4.4 months, the lowest rate since May 2005.
The low inventories are encouraging multiple bids on homes and helping to boost prices, NAR economist Lawrence Yun said.
Nationwide, the median price for a home resale was $180,800 in December, up 11.5 percent from a year earlier.
Distressed sales fell to 24 percent of total sales from 32 percent a year ago.
The share of distressed sales, which also include those where the sales price was below the amount owed on the home, was up from 22 percent in November.
(Reporting by Jason Lange; Editing by Neil Stempleman)