Rates eased, but contracts still fell as tight supply kept buyers on the sidelines
Pending contracts on US homes slipped again in January even as borrowing costs eased, underscoring how thin inventories and uneven regional demand continued to weigh on the housing recovery.
The National Association of Realtors’ Pending Home Sales Index fell 0.8% from December and 0.4% from a year earlier, marking another month in which contract activity remained subdued.
The index stood at 70.9, well below pre‑pandemic norms, with month‑over‑month gains in the Midwest and West offset by drops in the Northeast and South. Year over year, the South and West posted modest increases, while the Northeast and Midwest declined.
Broader affordability gains, limited impact
NAR chief economist Lawrence Yun said the pullback came despite lower mortgage rates widening the pool of potential borrowers.
“Improving affordability conditions have yet to induce more buying activity,” Yun said.
“With mortgage rates nearing 6%, an additional 5.5 million households that could not qualify for a mortgage one year ago would qualify at today’s lower rates.”
“Most newly qualifying households do not act immediately, but based on past experience, about 10% could enter the market—potentially adding roughly 550,000 new homebuyers this year compared with last year,” Yun said. These figures reflected NAR’s internal estimates and had not been independently verified.
Regionally, pending home sales in January decreased 5.7% month over month and 8.3% year over year in the Northeast, while the South saw a 4.5% monthly decline but a 4.0% annual increase.
The Midwest posted a 5.0% monthly gain and a 3.3% annual drop, and the West recorded a 4.3% rise from December and a 0.3% gain from a year earlier.
Inventory and policy in the spotlight
Yun said the main constraint remained supply, warning that any influx of newly qualified buyers could reignite price pressures.
“Unless housing supply increases, these additional potential buyers becoming active in the market could simply push up home prices,” he said.
“This will put increasing pressure on affordability, which is why it is critical to increase supply by building more homes.”
He pointed to federal efforts to address the shortfall. “Fortunately, the House of Representatives recently passed the Housing for the 21st Century Act with strong bipartisan support, an important signal that addressing the nation’s housing shortage remained a shared priority,” Yun said.
“The legislation is a meaningful step toward expanding housing supply and removing barriers that make it harder for Americans to achieve homeownership.”
The House legislation aims to boost housing production by easing local and federal bottlenecks. The 199‑page bill would streamline project reviews, exempt some smaller developments from certain requirements, modernize local development and housing programs, expand financing for manufactured and affordable housing, and step up reporting on barriers facing seniors and people with disabilities.
The House bill emerged in a political moment where president Donald Trump made housing costs a marquee domestic issue and floated a ban on large investors buying single‑family homes.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
