The Pending Home Sales Index, which measures the number of sales contracts signed each month, fell 7.7% to 80.4 from a downwardly revised reading of 87.1 in December. That's the lowest level since tracking began in 2001.
A consensus estimate of analysts polled by Briefing.com predicted a decline of 3.5% to 84.2.
The index is 6.4% below January 2008, when it 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.
Usually a one- to two-month lag exists between a contract and a completed deal. January's pending home sales are likely to be finished in the coming weeks.
The number of contracts signed in January rose more than 2% in the West, but it fell in all other regions: almost 13% in the Northeast, nearly 12% in the South, and more than 9% in the Midwest.
NAR predicts similarly soft sales in the near term, but said it anticipates that cheaper home prices and President Obama's $8,000 first-time home buyer tax credit - part of the Housing and Economic Recovery Act of 2008 - will boost the market.
Record-high affordabilityThe report's housing affordability index rose 13.6 percentage points to 166.8, a new record high.
A value of 100 means that a family with the country's median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home. The higher the index, the better housing affordability is for buyers.
The reading shows the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.
"History suggests that home sales can rise even in times of job losses when housing affordability rises," said Yun, adding that he expects sales to turn around by the summer.
Mortgage applications plunge
Nashville-area home sales hit 15-year low
U.S. home sales rise in December
Housing starts plummet
