Pending home sales fell to its lowest level in January data showed on the National Association of Realtors' report released Tuesday.

The Pending Home Sales Index, which was started in 2001, are based on contracts signed in January dropped 7.7 percent to 80.4, the lowest level since.  That’s a drop from a downwardly revised reading of 87.1 in the month of December. January's reading was 6.4 percent below January 2008 when the Index stood at 85.9. 

"Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales," said Lawrence Yun, NAR chief economist, in the report.

The pending home sales index is a picture of what can happen in the future, typically within one to two months after signing the contract and a deal has yet to be closed. January’s pending home sales are likely to be completed in the coming weeks.

The January pending home sales index rose in the West with more than 2 percent, but declined in all other regions. Declines were recorded in the Northeast with 13 percent, in the South nearly 12 percent, and more than in the Midwest with more than 9 percent. 

Included in the report is the housing affordability index which improved with 13.6 percentage points to 166.8, a new record high. 

To interpret the index, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.(http://www.realtor.org/research/research/hameth). 

The reading shows the relationship between home prices, as calculated by NAR, mortgage interest rates, with data coming from the Federal Housing Finance Board and HSH Associates and family income, as reported by the US Bureau of Census. 

"History suggests that home sales can rise even in times of job losses when housing affordability rises," said Yun, and he is hopeful that sales will turn around by late spring and early summer.