KEY POINTS:
The holiday season has been blamed for the national median house price falling $7000 in the last month but economists say the flatter market was because of far more than just the Christmas break.
The Real Estate Institute's national house sales median fell from $352,000 in November to $345,000 last month, which president Murray Cleland said was because of the Christmas break and the market having reached a peak.
But Nick Tuffley, ASB's chief economist, said the market had reacted to high interest rates and the sheer unaffordability of housing and he predicted the sector would cool this year. He believed the international economic situation was very dicey.
He questioned the validity of the institute's figures, saying a Quotable Value was a far more reliable measure and one the Reserve Bank preferred.
Although the institute's figures were the freshest news, the houses sold changed from month to month, making it difficult to compare periods.
Shamubeel Eaqub of Goldman Sachs JBWere said the latest housing data pointed to a wider economic slowdown.
"The deepening correction in the housing market is likely to spill over to a more broad-based economic slowdown this year," he said.
A number of linkages between housing and the general economy were worrying but the most important factors were the dangerously high exposure of many people to the housing sector. About 76 per cent of total assets were in property and some debt levels were extremely high.
Mr Cleland said the picture was actually better than expected. Fewer sales were likely last month because of the holiday break, and the market had been growing strongly over the past seven years.
"Despite some commentators' predictions, there is no discernable erosion of property values. While successive interest rate increases have impacted on the number of properties sold, prices remain steady.
"This suggests the market may have reached a peak and is now levelling off after a very strong performance over the last seven years," Mr Cleland said.
"Over that period the national median selling price has more than doubled from $170,000 in December 2000 to $345,000 at the end of 2007."
Many factors were affecting the market, including the increased cost of home finance and slowing immigration, he added.
The median sales price and the number of sales were both down, but the median days to sell - a key market indicator - remained steady at 36, he said.
Volume dropped from 7837 house sales in November to 5597 last month.