The National Association of Realtors said Tuesday that pending home sales fell again in January, dropping more than 6 percent from a year earlier to the lowest level since 2001, when the trade group began tracking the figures.
The slowdown in sales comes as NAR's housing affordability index hit a fresh all time high.
“Housing affordability is at a record high – the buying power of a typical family has risen significantly,” NAR President Charles McMillan said in a press release. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment."
So why aren't consumers taking advantage of today's attractive financing and lower prices? The weakening labor market is the biggest factor, says Mike Larson of Weiss Research.
From Larson's report on the pending home sales figures:
I've been saying for a while here, it really does all come back to the job market. And the latest evidence suggests we're seeing little relief on that front. Jobless claims are rising sharply and layoff announcements are coming fast and furious. The dramatic decline in consumer confidence doesn't help, either. Nor does the deflationary psychology that haunts home buyer's dreams these days. Those forces are offsetting any positive benefit from rising affordability.