Contracts to buy previously owned homes unexpectedly declined in January to their lowest level in more than three years, another sign that the housing market appears to be losing some momentum.

The National Association of Realtors said on Wednesday its pending home sales index dropped to a reading of 104.6, down 4.7 percent from the prior month. December's index was also downwardly revised to 109.8.

Economists polled by Reuters had forecast pending home sales rising 0.3 percent last month.

Pending home contracts are seen as a forward-looking indicator of the health of the housing market because they become sales one to two months later.

The housing market has stumbled at the turn of the year. Sales of both new single-family homes and previously owned homes fell for a second straight month in January.

Near-record low inventory has hampered home sales, pushing up prices and making properties at the lower end of the market unaffordable to some first-time buyers.

Mortgage rates have also risen to a four-year high while economists worry a cap on the mortgage interest deduction in the new tax code could slow housing demand this year.

Compared to one year ago, pending sales were down 3.8 percent to the lowest level since October 2014. Last month, contracts in all four major regions fell with the biggest decline recorded in the Northeast, which saw a drop of 9.0 percent.

"The economy is in great shape, most local job markets are very strong and incomes are slowly rising, but there’s little doubt last month's retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates," NAR chief economist Lawrence Yun said in a statement.