Pending home sales in the United States experienced a 4.6% decline in January, according to a report released today by the National Association of Realtors® (NAR). The drop reflects ongoing challenges in the housing market, primarily driven by elevated home prices and rising mortgage rates.
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, fell to 70.6 in January, marking a low point. Year-over-year, pending transactions decreased by 5.2%.
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Regional disparities were evident in the January figures. The Midwest, South, and West all saw month-over-month declines, with the South experiencing the most significant drop (9.2%). The Northeast, however, saw a slight increase of 0.3%. Year-over-year, all four regions reported declines in contract signings, with the South again leading the downturn, down 8.8% from January 2024.
“It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months,” said NAR Chief Economist Lawrence Yun. “However, it’s evident that elevated home prices and higher mortgage rates strained affordability.”
Housing affordability was a significant factor in January, with mortgage rates ranging from 6.91% to 7.04%. Compared to the previous year, the monthly mortgage payment on a $300,000 home increased by approximately $50, reaching $1,590.
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Regional Breakdown:
- Northeast: PHSI rose 0.3% to 63.4, down 0.5% year-over-year.
- Midwest: PHSI fell 2.0% to 72.8, down 2.7% year-over-year.
- South: PHSI plummeted 9.2% to 81.0, down 8.8% year-over-year.
- West: PHSI decreased 1.2% to 57.6, down 4.5% year-over-year.
Yun expressed optimism that even a slight reduction in mortgage rates could stimulate buyer interest, given rising incomes, increased job opportunities, and growing inventory.
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