Pending home sales dropped 4.6 percent in January, according to the National Association of Realtors’ (NAR) pending home sales index (PHSI).

Month-over-month, the Midwest, South and West saw losses in transactions, with the most significant drop in the South, while the Northeast saw a modest gain. All regions saw fewer contract signings year-over-year, with the South again seeing the greatest falloff.

The PHSI dropped to 70.6 in January, an all-time low. (Last year’s low point in July 2024 was revised from 70.2 to 71.2). An index of 100 is equal to the level of contract activity in 2001.

Year-over-year, pending transactions declined 5.2 percent.

“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,” NAR Chief Economist Lawrence Yun said in a release. “However, it’s evident that elevated home prices and higher mortgage rates strained affordability.”

Housing affordability suffered in January as mortgage rates ranged from 6.91 percent to 7.04 percent. Compared to a year ago, the monthly mortgage payment on a $300,000 home increased $50 to $1,590, according to NAR. 

The Northeast PHSI rose 0.3 percent month-over-month to 63.4, down 0.5 percent from January 2024. The Midwest index fell 2 percent to 72.8, down 2.7 percent year-over-year.

The South PHSI plunged 9.2 percent month-to-month to 81, down 8.8 percent from a year ago. The West index fell by 1.2 percent from the prior month to 57.6, down 4.5 percent from January 2024.

“Even a slight reduction in mortgage rates will likely ignite buyer interest, given rising incomes, increased jobs and more inventory choices,” added Yun.

 The PHSI is a leading indicator for the housing sector, according to NAR, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a sample that covers about 40 percent of multiple listing service data each month.