The pending home sale index showed an increase of 3.4 percent in the Midwest over November 2007, but declines of 1.7 percent in the Northeast, 3.0 percent in the South, and 3.1 percent in the West.

The association predicted, "soft market conditions … in the months ahead," with some improvement expected in the second half of the year.

Despite relatively low mortgage rates "household formation was only half of what it should have been last year," said Lawrence Yun, chief economist for the National Association of Realtors.

The association predicts 4.9 million home sales for the first half of 2008 and 5.8 million sales for the second half of the year.