According to the National Association of Realtors (NAR), pending home sales in the U.S. dropped 4.6% in January 2025. The Midwest, South, and West saw month-over-month declines in transactions, with the South experiencing the steepest drop. The Northeast was the only region to post a slight increase. On a year-over-year basis, contract signings fell across all four regions, with the South seeing the most significant decline.
The Pending Home Sales Index (PHSI) – a leading indicator of future home sales based on contract signings – decreased 4.6% to 70.6 in January, marking a record low. The previous cyclical low from July 2024 was revised upward from 70.2 to 71.2. Compared to January 2024, pending transactions were down 5.2%. For context, an index of 100 represents the contract activity level from 2001.
Lawrence Yun
“It’s unclear whether the coldest January in 25 years kept buyers out of the market. If so, we may see increased activity in the coming months,” said NAR Chief Economist Lawrence Yun. “However, the bigger issue is affordability, as elevated home prices and higher mortgage rates continue to put pressure on buyers.”
In January, mortgage rates ranged from 6.91% to 7.04%, further straining affordability. Compared to a year ago, the monthly mortgage payment on a $300,000 home rose by $50, reaching $1,590.
“Even a modest drop in mortgage rates could spark renewed buyer interest, especially as incomes rise, employment strengthens, and more inventory becomes available,” Yun added.
Regional Breakdown of Pending Home Sales
- Northeast: The PHSI edged up 0.3% to 63.4, but remained 0.5% lower than in January 2024.
- Midwest: The index fell 2.0% to 72.8, reflecting a 2.7% annual decline.
- South: Transactions dropped 9.2% to 81.0, an 8.8% year-over-year decrease.
- West: The index slipped 1.2% to 57.6, down 4.5% from a year ago.
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