The National Association of Realtors® (NAR) pending home sales index fell more than expected in January, dropping to its lowest level on record. The index came in at 70.6, a 4.6% decline from the previous month and a 5.2% drop from one year ago. Pending home sales were expected to fall 0.9% month-over-month.
"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."
"Even a slight reduction in mortgage rates will likely ignite buyer interest, given rising incomes, increased jobs and more inventory choices," added Yun.
Pending Home Sales Background
The pending home sales index (PHSI) was created by the National Association of Relators to track home sales where the contract is signed, but the transaction has not yet closed. An index of 100 is equal to the level of contract activity in 2001. The PHSI is a leading economic indicator of future existing home sales.
The chart below gives us a snapshot of the index since 2001, the first year data was analyzed. 
Over this time frame, the US population has grown by 20.3%. For a better look at the underlying trend, here is an overlay with the nominal index and the population-adjusted variant. The focus is pending home sales growth since 2001.
The above chart shows the percent off turn-of-the-century values. The index for the most recent month is currently 45% below its all-time high from August 2020. The population-adjusted index is 52% off its high from April 2005.
