The housing market continued to slow in February, according to NAR’s latest report.

Pending home sales fell for the eight straight month in February, according to the latest numbers from the National Association of Realtors.

The Pending Home Sales Index, NAR’s measure of contract activity, slipped 0.8 percent from January and 10.5 percent from Feb. 2013 to a reading of 93.9; that’s the lowest reading since Oct. 2011, when it was 92.2 – and before the housing recovery began.

Regional Divide in Pending Home Sales

Of course, this being real estate, there were some regional differences in how pending home sales performed:

• In the Northeast, pending sales were down 2.4 percent monthly and 7.4 percent yearly; in the Midwest, they rose 2.8 percent monthly, but were down 8.5 percent yearly; in the South, they fell 4.0 percent monthly and 9.3 percent yearly; and finally, in the West, they were up 2.3 percent monthly but down 16.5 percent yearly.
• Based on pending contracts so far, NAR is projecting existing-home sales to hit 5.0 million this year, which would be down from 5.1 million in 2013; housing starts, though, are still project to rise nearly 19 percent.
• Also, median price for existing homes is expected to rise 5.5 to 6 percent this year, down from 2013’s 11.5-percent jump.

A Housing Slowdown in 2014?

So, what factors are behind February’s lackluster contract numbers? Interestingly, Lawrence Yun, NAR’s chief economist, was optimistic in his comments about NAR’s report.

“Contract signings for the past three months have been little changed, implying the market appears to be stabilizing,” he said. “Moreover, buyer traffic information from our monthly Realtor survey shows a modest turnaround, and some weather delayed transactions should close in the spring.”

There is one elephant in the room, though, that Yun did not mention – rising mortgage rates, and how those will impact home sales. Below, we have a graph that charts the relationship between home sale contracts and mortgage rates, and the correlation is difficult to ignore.