Signed contracts to buy existing homes dropped 8.7 percent in December as abnormally cold weather hit much of the U.S., according to a new report from the National Association of Realtors. The plunge caught economists by surprise. Economists polled by Reuters had forecast pending home sales would tick up 0.3 percent. (Click here to track the U.S. market indices following the report.)

This pending home sales index fell to 92.4 from a downwardly revised 101.2 in November. These signed contracts are an indicator of sales in January and February, and are at the lowest level since October 2011.

"Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice. Although it could take several months for us to get a clearer read on market momentum, job growth and pent-up demand are positive factors," said the association's chief economist, Lawrence Yun.