Sales of existing U.S. homes eased 2.8 percent in January to the slowest pace in nearly two years while the inventory of homes on the market climbed to its highest since 1998, according to trade group data released on Tuesday that signaled further cooling in the housing sector.

Sales of existing homes fell to a 6.56 million unit annual rate in January, the fifth monthly decline in a row, from December's upwardly revised 6.75 million unit pace, according to the National Association of Realtors. The sales figure includes both single-family homes and condos.

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Analysts had forecast sales at a 6.6 million unit pace, unchanged from what was originally reported for December.

"The housing market is certainly shifting away from a record-breaking pace," said Lawrence Yun, senior economist for the Realtors.

U.S. stocks and the dollar eased and Treasury bond prices rose after the data showing a slower-than-expected sales pace.

The decline in total sales was driven by a 1.5 percent fall in the pace of single-family home sales and a 10.6 percent drop in condo sales in January, the Realtors data showed.

Inventories climbed in January by 2.4 percent, leaving 2.91 million existing homes available for sale at the end of the month. That equates to 5.3 months' supply at the current sales pace, the highest since August 1998.

January's drop signaled further cooling in the U.S. housing market after five years of gains that shattered construction and sales records and sent prices up more than 50 percent. The sector started to ease as mortgage rates began to climb.

On Monday, the Commerce Department said sales of new U.S. homes fell 5 percent in January to their slowest pace in a year while the number of homes on the market hit a record high.

Home prices, however, have been more resilient, and economists chalk that up to sellers trying to cash out at the market's highs. For January, Realtors data show the median home price rose 11.6 percent to $211,000.

The Realtors said home sales were slowing in the priciest markets where an increase in mortgage rates will have the biggest effect on buying power. Sales dropped 10 percent in the Northeast, 7.7 percent in the Midwest and 3.5 percent in the West.

The South, however, reported a 2.6 percent gain in existing home sales, due in part to increased buying in the Gulf Coast region, which was devastated by hurricanes in 2005. The Realtors said home sales surged 40 percent in New Orleans in January compared with a year ago.

Other Gulf Coast cities showing sales strength included Houston, Baton Rouge and Mobile, the group said.