US pending home sales fell 0.8% month over month in January. That was weaker than the expected 1.3% rise.
The result was 2.1 percentage points below expectations. Pending home sales track contract signings and often signal near-term changes in completed sales.
Housing Recovery Losing Momentum
The January pending home sales report was a clear disappointment. Instead of growing, sales fell. This points to a housing recovery that is losing steam, as buyers still face high borrowing costs. Even though the average 30-year mortgage rate has eased slightly to about 6.5% nationwide, homes remain unaffordable for many buyers.
This weak housing print also affects how we view the Federal Reserve’s next moves. With inflation cooling and CPI moderating to 2.8%, softer housing data gives the Fed more room to consider rate cuts sooner. Derivatives markets now price in better than a 60% chance of a rate cut by the May 2026 meeting, up notably from last month.
For us, this supports positioning in interest-rate derivatives that benefit from falling yields. We are looking to add to SOFR-linked futures positions, expecting markets to keep pricing a more dovish Fed. This is a direct way to express the view that the central bank may need to respond to slower growth.
In equities, we expect continued pressure on rate-sensitive sectors such as homebuilders and regional banks. We are considering put options on ETFs like XHB to hedge, or to potentially profit, if housing-related stocks weaken further. We saw a similar setup in early 2025, when housing softness came ahead of a broader market pullback before the Fed shifted its tone.
Dollar Sensitivity To Rate Differentials
A more dovish Fed outlook also matters for the U.S. dollar. Currency values are strongly influenced by interest-rate differences across countries. If U.S. rate cuts look more likely, that can weigh on the dollar index. As a result, we are exploring call options on pairs such as EUR/USD, positioning for a weaker dollar in the second quarter.
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