The National Association of Realtors' Pending Home Sales Indes fell 1.5% to a reading of 85.9 in December, down from a downwardly revised reading of 87.2 in November. The index was down 24.2% from December, 2006.

Regionally, the index rose 3.4% in the Midwest to 84.9, 17.3% below a year ago; fell 1.7% in the Northeast to 68.9, 26% below December, 2006; fell 3% in the South to 96.4, 27% below a year ago; and fell 3.1% in the West to 83.9, a drop of 24.1% below December, 2006.

The NAR predicted that existing home sales would pace at a 4.9 million annual level through the first half of 2008, then surge to a rate of 5.8 million in the second half. It also projects that the aggregate existing-home price will fall 1.2% in 2008 to a median of $216,300 and then rise 3.2 percent to $223,200 in 2009.

The NAR sees new home sales continuing to decline throughout 2008 to an annual pace of 637,000, down 17.7% from a miserable 2007, before rising 7.6% to 685,000 in 2009. The NAR forecasted that housing starts, including multifamily units, will fall 20.1% to 1.08 million this year and decline another 1.3% to 1.07 million in 2009. It saw the median new-home price falling 4.3% to $236,300 in 2008 before increasing 5.0% in 2009.

The NAR forecast assumed that Congress will act on an economic stimulus package that includes a raise in the loan limites on conventional mortgages. That stimulus package, as of Thursday morning, was stalled in the Senate as Democrats and Republicans sparred over the size of the overall package and what interest groups it would benefit.

"Existing-home sales have moved narrowly since last September, but when the full impact of higher loan limits for conventional mortgages begins to impact the market there is likely to be a notable rise in home sales and prices," said Lawrence Yun, NAR chief economist. "If higher limits are enacted very quickly, we'll see a faster and more meaningful recovery by expanding safe, affordable financing in high-cost areas--that, in turn, would help to stimulate overall economic activity."

Yun also noted a decline in the rate of household formation last year, which contributed to a paucity of first-time home buyers. "Household formation was only half of what it should have been last year given the demographics of a growing population and sustained job growth, so there clearly is a pent-up demand from buyers who are on the sidelines," he said.

The Pending Home Sales Index is a leading indicator for the housing sector, 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.