The National Association of Realtors Pending Home Sales index fell 4.9% to 74.3. A poll by Reuters showed economists expected a 1.0% increase.

The increase in pending sales in December was revised sharply lower to 5.7% from 8.3%, even as the index value for that month was revised higher, reflecting NAR revisions for 2023.

“The job market is solid, and the country’s total wealth reached a record high due to stock market and home price gains,” said Lawrence Yun, chief economist at the NAR. “This combination of economic conditions is favorable for home buying. However, consumers are showing extra sensitivity to changes in mortgage rates in the current cycle, and that’s impacting home sales.”

On a year-over-year basis, pending home sales fell 8.8% in January.

In late 2023, contracts signed tumbled as higher mortgage rates limited prospective buyer traffic and discouraged homeowners from selling. The average rate on the 30-year fixed-rate mortgage has eased from two-decade highs near 8% in October, remaining below 7% since early December, according to Freddie Mac, after the Federal Reserve left its policy benchmark rate unchanged since July.

On a monthly basis, the Midwest and South experienced the largest decline in pending sales in January, by a respective 7.6% and 7.3%. On a year-over-year basis, all regions posted a decrease in pending home sales.