The real estate market saw a notable shift in January, with pending home sales dropping by 4.9%, as reported by the National Association of REALTORS®. While the Northeast and West regions saw gains in monthly transactions, the Midwest and South experienced losses. This trend extended across all four U.S. regions, with year-over-year decreases recorded.

The Pending Home Sales Index (PHSI), a key indicator based on contract signings, reflected this downturn, decreasing to 74.3 in January, marking an 8.8% decline compared to the previous year. Despite a strong job market and record-high wealth fueled by stock market and home price gains, consumers are exhibiting heightened sensitivity to mortgage rate fluctuations, influencing home buying decisions.

Here's a breakdown of the regional performance:

Northeast: The PHSI in the Northeast increased by 0.8% from the previous month to 63.6, though it declined by 5.5% compared to January 2023.

Midwest: In contrast, the Midwest witnessed a 7.6% decrease in its PHSI, dropping to 73.7 in January, representing an 11.6% decline from the previous year.

South: The South experienced a notable decline of 7.3% in its PHSI, reaching 88.5 in January, down by 9.0% from the prior year.

West: On the other hand, the West saw a slight increase of 0.5% in its PHSI, reaching 61.1 in January, albeit down by 7.0% from January 2023.

Lawrence Yun, Chief Economist at NAR, noted the varying dynamics across regions, highlighting faster job growth in Southern states and the Rocky Mountain time zone, which is bolstering long-term housing demand. However, the timing and volume of purchases in these regions will be contingent on mortgage rates and inventory availability.