Pending home sales drop slightly in January

The number of foreclosed homes becoming available — foreclosures are expected to rise about 20 percent this year — are expected to push prices down, while high unemployment, tight credit and rising interest rates could hamper sales. 

"The housing market is healing, with sales fluctuating at times, depending on the flow of distressed properties coming on the market," Yun said.

Sales of existing homes rose unexpectedly by 2.7 percent in January to 5.36 million, the highest level in eight months, as investors bought up repossessed homes. 

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If contract activity stays on its present course, there should be an 8 percent increase in total existing-home sales this year, according to the NAR.

"The broad fundamentals for a housing recovery are developing," Yun said. "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."

The index for the Northeast declined 2.4 percent to 73.5 in January, and is 3 percent below January 2010. In the Midwest, the index fell 7.3 percent in January to 78.0 percent and is 3.2 percent below a year ago. 

Pending home sales in the South rose 1.4 percent to an index of 97.7 percent, but are 0.4 percent below January 2010. 

In the West, the index fell 5.2 percent to 98.7 and is 0.9 percent below a year ago.