Pending home sales fell 2.8% in January from the prior month yet remain 20.6% higher than the depths reached in June, according to the National Association of Realtors. While the large number of foreclosures and distressed properties continue to weigh on a recovery, existing home sales for January rose to 5.36 million, which is slightly higher than NAR's estimates for 2011. If that pace continues through the year, there will be an 8% increase for existing home sales, according to NAR. The large trade association, which has more than 1.1 million members, said its pending home sales index, which is based on contracts signed, decreased to 88.9 for the first month of the year from a downwardly revised 91.5 for December. NAR said the index is 1.5% lower than 90.3 for the year earlier January when the federal tax credit was still available for potential home buyers. NAR chief economist Lawrence Yun said the housing market "is healing with sales fluctuating at times, depending on the flow of distressed properties coming on the market." "While home buyers over the past two years have been exceptionally successful with historically low default rates, there is still an elevated level of shadow inventory of distressed homes from past lending mistakes that need to go through the system," Yun said. "We should not expect the recovery to be in a straight upward path – it will zig-zag at times." The index rose 1.4% in the South in January, while falling in all other parts of the country. In the Northeast, pending sales fell 2.4% with a 7.3% drop in the Midwest and a 5.2% decline in the West. "The broad fundamentals for a housing recovery are developing," Yun said. "Job growth, high housing affordability and rising apartment rent are conducive to bringing more buyers into the market. Some buyers may be looking to real estate as a hedge against potential future inflation." Write to Jason Philyaw.