Industry data released Monday showed that the number of homebuyers who signed contracts in January for the purchase of previously owned homes declined from both the previous month and year-ago levels.
The ""National Association of Realtors"":http://www.realtor.org (NAR) says its January index of pending home sales is down 2.8 percent from the December reading, which was revised downward. December's pending home sales were previously reported as a 2 percent gain compared to the previous month, but the amended numbers now reflect a 3.2 percent drop.
With the December revision, ""NAR's pending sales index"":http://www.realtor.org/research/research/phsdata has fallen for two consecutive quarters after posting a 3.5 percent increase in November and a 10.4 percent surge during the month of October.
The index is based on contracts signed during the month, as opposed to closings. NAR says this forward-looking indicator typically signals where existing-home sales levels should be within one or two months.
Industry analysts say the latest results are testament to the challenges that still lie ahead for the housing sector. The January index of pending sales fell further than experts were expecting. _Bloomberg News_ says the median estimate in a survey of economists it conducted called for a[COLUMN_BREAK]
2.3 percent monthly decline, while economists polled by _Reuters_ were expecting a 2.2 percent drop.
NAR's January reading is 1.5 percent below the pending sales measurement recorded 12 months earlier when the federal government's tax credit stimulus was in place. But NAR noted that it remains 20.6 percent above the cyclical low hit last June after the credit had expired.
Lawrence Yun, NAR's chief economist, points to the broader trend. ""The housing market is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market,"" he said.
""While home buyers over the past two years have been exceptionally successful with historically low default rates, there is still an elevated level of shadow inventory of distressed homes from past lending mistakes that need to go through the system,"" Yun said. ""We should not expect the recovery to be in a straight upward path Ã¢â‚¬" it will zig-zag at times.""
Yun also noted that the pace of January's existing-home sales, 5.36 million annually, is slightly higher than NAR's annual forecast for 2011. If contract activity stays on its present course, he says there should be an 8 percent increase in total existing-home sales this year.
""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.""
Only the southern region of the country saw pending home sales rise relative to December, up 1.4 percent, according to NAR's study.
The pending sales index in the Northeast declined 2.4 percent. In the Midwest it fell 7.3 percent. And in the West the index dropped 5.2 percent.