Pending Home Sales Decline Slightly in January – What It Means for Home Buyers and Mortgage Rates in 2026

The housing market often gives early clues about future home sales activity through a key metric called the Pending Home Sales Index (PHSI), tracked by the National Association of Realtors. This index measures the number of signed contracts to purchase homes each month and is widely considered a leading indicator of future housing market trends.

In January, the index showed a modest slowdown. Pending home sales fell 0.8% compared to December and were down 0.4% year-over-year, suggesting that some buyers remain cautious despite improving affordability conditions.

According to Lawrence Yun, lower mortgage rates are gradually expanding homebuyer eligibility, but many potential buyers are still waiting before entering the market.

Lower Mortgage Rates Are Expanding Buyer Qualification

One of the biggest shifts over the past year is how falling mortgage rates have improved purchasing power. Yun estimates that approximately 5.5 million households who previously could not qualify for a mortgage may now qualify at today’s lower rates.

However, housing demand doesn’t surge immediately when affordability improves. Historically, only a portion of newly qualified buyers act quickly.

Based on past trends:

• About 10% of newly eligible households typically enter the market

• That could result in roughly 550,000 additional home buyers this year

• Increased demand could help stabilize home sales and support housing inventory absorption

Why Some Buyers Are Still Waiting

Even with improved mortgage affordability, several factors are causing buyers to pause:

1. Inventory constraintsMany markets still face limited housing supply, especially in desirable suburban areas.

2. Economic uncertaintySome buyers are waiting for clearer signals on inflation, interest rates, and job stability.

3. Rate expectationsProspective buyers sometimes delay purchases in hopes that mortgage rates will drop further.

What This Means for Buyers Right Now

While pending home sales dipped slightly in January, the underlying fundamentals suggest buyer demand could grow throughout the year.

If even a small percentage of newly qualified households begin purchasing homes, the market could see:

• Increased competition for available homes

• Faster contract activity

• Continued stabilization of the housing market

For buyers, this means waiting too long could mean competing with more buyers later in the year as affordability improves.

Opportunities for Buyers in Today’s Market

Despite the slowdown in contract signings, today's market still offers opportunities:

• Lower mortgage rates compared to last year

• More negotiating power than during peak market conditions

• Potential to refinance later if rates continue to fall

Smart buyers are using this period to lock in homes before competition increases.

Local Market Perspective: New Jersey, Pennsylvania, and Florida

Across New Jersey, Pennsylvania, and Florida, many markets continue to see steady demand, particularly among first-time buyers and families relocating for affordability.

Lower mortgage rates are gradually helping more buyers qualify, which means activity could accelerate as the year progresses.

The Bottom Line

January’s dip in pending home sales doesn’t necessarily signal weakness in the housing market. Instead, it reflects a transition period as affordability improves and more households become eligible for home financing.

As mortgage rates stabilize and more buyers re-enter the market, housing demand could strengthen significantly over the coming months.

If you’re considering buying a home or want to see how much you qualify for in today’s market, speaking with an experienced mortgage professional can help you understand your options and prepare for opportunities ahead.