Pending home sales hit nearly 3-year high

Pending home sales rose in January to their highest level in three years as buying is bolstered by a combination of an improving labor market and pent-up demand. 

The contract signings index, a forward-looking indicator that reflects future sales, increased 4.5 percent to 105.9 in January, hitting its highest level since April 2010 when a home buyer tax credit was in place to spur purchases, the National Association of Realtors reported on Wednesday. 

The index is up after December figures were revised down to 101.3. Still they are 9.5 percent above January 2012 when it was 96.7. 

All four regions saw improvements, too, although the West's signings are being held back by a lack of supply. 

Aside from spikes boosted by the tax credits three years ago, the last time there was a higher reading was in February 2007 when it reached 107.9.

"Favorable affordability conditions and job growth have unleashed a pent-up demand," said Lawrence Yun, NAR chief economist. 

"Most areas are drawing down housing inventory, which has shifted the supply-demand balance to sellers in much of the country. It's also why we're experiencing the strongest price growth in more than seven years," he said.

Low housing supply is pushing up prices but also hampering the pace of sales. 

"Over the near term, rising contract activity means higher home sales, but total sales for the year are expected to rise less than in 2012, while home prices are projected to rise more strongly because of inventory shortages," Yun said.

Yun expects approximately 5 million existing-home sales this year. 

However, price growth could exceed a 7 percent gain projected for this year if inventory supplies remain low. 

Previously, NAR had expected 5.1 million existing-home sales in 2013, while prices were forecast to rise 5.5 to 6 percent.

The index in the Northeast rose 8.2 percent last month and is 10.5 percent higher than January 2012. 

In the Midwest, the index increased 4.5 percent and is 17.7 percent above a year ago. 

Pending home sales in the South rose 5.9 percent and are 11.3 percent higher than last January. 

In the West, the index edged up 0.1 percent but is 1.5 percent below a year ago because of inventory problems.