The National Association of Realtors Pending Home Sales Index (PHSI) fell 2.8% in January from a downwardly revised December reading, the group said Monday. Drops in the Northeast, Midwest and West offset a modest gain in the South.

The PHSI declined to 88.9 based on January sales contracts from a downwardly revised 91.5 in December, which was reduced from the original estimate of 93.7. That meant that ending home sales have now declined for two consecutive months, albeit modestly. The index was 1.5% percent below the90.3 level registered in January 2010 when the home-buyer tax credit was in place.

"We should not expect the recovery to be in a straight upward path -- it will zig-zag at times," said Lawrence Yun, NAR chief economist. "The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market."

The pace of January existing-home sales of 5.36 million is slightly higher than NAR's forecast for 2011. If that pace holds, the Realtor groups says there should be an 8% increase in total existing-home sales this year.

Regionally, the PHSI in the Northeast declined 2.4% to 73.5 in January, 3% percent below January 2010. The Midwest dropped 7.3% 78, 3.2% below a year earlier. The South, the largest region, rose 1.4% to an index of 97.7, 0.4% below January 2010. The West was off 5.2% to 98.7, 0.9% below a year ago.

Added Yun, "The broad fundamentals for a housing recovery are developing. Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market. Some buyers may be looking to real estate as a hedge against potential future inflation."

Yun's invocation of real estate-as-an-inflation-hedge was significant in that it is the first time in recent years that the Realtor organization has made that sales argument.