Lawrence Yun, NAR chief economist, attributed the decline to myriad factors including cold weather and the lack of home supply, together with higher prices.
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“Additionally, some buyers could be waiting for a hike in listings come springtime”, he said.
Pending home sales tumbled 3.2 per cent in the Northeast, which was blanketed by a massive snow storm in late January.
Pending home sales become sales after a month or two, and January’s unexpected drop suggested home resales will likely weaken after rising only 0.4 percent last month.
The NAR reported last week that its more closely watched index – final sales of existing homes, measuring purchases after closing – rose 0.4 per cent in January from the prior month to a seasonally adjusted annual rate of 5.47 million, the fastest sales pace since July.
Data on pending home sales during January will be released at the top of the hour.
The Wall Street Journal noted the January slip demonstrated that “swiftly rising prices and lower inventory muted buyer demand after the strongest year in almost a decade”.
In one year, the indicator remains in the green with an increase of 1.4%.
Economists had estimated that signed contracts for existing single-family homes, condos and co-ops rose 0.5% according to Bloomberg. “Without a much-needed boost in new and existing-homes for sale in their price range, their path to homeownership will remain an uphill climb”. “As they build more, there will be an increase in new-home sales”. The decline comes after the sales index averaged 108.9 in 2015, its highest level since 2006. The national median existing-home price for all of this year is expected to increase between 4 and 5 percent.
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The NAR attributed the drop to tight housing inventories, which are limiting choice for potential buyers and pushing up home prices. A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the NAR.
