NEW YORK - Fewer U.S. home sellers are cutting asking prices as competing inventory shrinks and an extended buyer tax incentive lessens the urgency to sell, real estate website said on Wednesday.

A total of 22 percent of houses on the market as of December 1 have lowered prices at least once, down from 25.6 percent in November, marking the lowest share since Trulia started tracking reductions in April.

The average discount for price-reduced homes rose slightly to 11 percent off of the original listing price, compared with 10 percent in the previous four months, Trulia said.

The tax credit extension has provided sellers with a much bigger window of opportunity, creating significantly less pressure to sell now, Pete Flint, chief executive of San Francisco-based Trulia, said in a statement.

Early last month, the Obama administration extended an $8,000 tax credit for first-time home buyers and added a $6,500 credit for move-up buyers.

Borrowers who meet the criteria have to sign purchase contracts by April 30 and close mortgage loans by June 30. After an initial race to beat the previous November 30 deadline, potential buyers now have several more months to shop around.

Total listings fell by 9 percent in the month, Trulia said in the report.

Home sellers slashed $24.7 billion from asking prices for houses listed as of December 1 nationwide, down 12 percent from $28.1 billion the prior month.

Owners with properties on the market vying against fewer other sellers are less likely to drop their asking prices.

With economic indicators showing positive signs during the past couple months, many sellers will be poised to wait to sell, Flint said.

The share of homeowners cutting prices is 19 percent below the share in April, when 27 percent of the listings saw price reductions.

In the latest hopeful sign for the U.S. economy, unemployment fell to 10 percent from 10.2 percent in November.

The highest rate of joblessness in more than 26 years has impeded a recovery in the most severe housing slump since the Great Depression.

The Trulia report showed price cuts are fewer in areas hardest hit by foreclosures, showing a floor is starting to be reached after deep discounting. These regions will be the first to return toward fair market value, Trulia said.

The South and West regions, which include some of the cities hardest hit by foreclosures, had the lowest level of price cutting in the latest report.

Nineteen percent of listings in the South and 20 percent in the West had price cuts, compared with 22 percent in the Midwest and 25 percent in the Northeast.

The luxury market continues to pay a high price in the housing bust.

Homes listed at $2 million or higher have slashed prices by an average of 14 percent from the original asking amount. These houses represent less than two percent of all current listings on Trulia, but are responsible for 26 percent of the $24.7 billion in home price reductions.

(Editing by Andrew Hay)