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In January, pending home sales slid 4.9%, according to the National Association of Realtors. While the Northeast and West posted monthly gains in transactions, the Midwest and South recorded losses; all four U.S. regions registered year-over-year declines.

With pending transactions down 8.8% year over year, the Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings—dropped to 74.3 in January. An index of 100 is equal to the level of contract activity in 2001.

"The job market is solid, and the country's total wealth reached a record high due to stock market and home price gains," says NAR chief economist Lawrence Yun. "This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that's impacting home sales."

Falling 9% from the prior year, the South PHSI declined 7.3% to 88.5 in January. The West index increased 0.5% in January to 61.1 but was down 7% from January 2023.

"Southern states and those in the Rocky Mountain time zone experienced faster job growth compared to the rest of the country," adds Yun. "As a result, long-term housing demand is increasing more significantly in these regions. However, the timing and number of purchases will largely depend on the prevailing mortgage rates and inventory availability."

The Northeast PHSI increased 0.8% from last month to 63.6, a drop of 5.5% from January 2023. In the Midwest, the index decreased 7.6% to 73.7 in January, down 11.6% from January 2023.