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The pending home sales index rebounded in January, after falling 4.9 percent in the previous month, the U.S. National Association of Realtors (NAR) reported Thursday.

The NAR said the forward-looking indicator based on contract signings rose 5.2 percent to 108.8 in January.

Year-over-year contract signings increased 5.7 percent. An index of 100 is equal to the level of contract activity in 2001.

“This month’s solid activity — the second-highest monthly figure in over two years — is due to the good economic backdrop and exceptionally low mortgage rates,” said Lawrence Yun, the NAR’s chief economist.

While noting lower mortgage rates is a positive factor supporting the housing market, he cautioned growth pace of home sales will be pressured by low inventory.

“We are still lacking in inventory,” Yun said, noting December’s and January’s combined supply was at the lowest level since 1999. “Inventory availability will be the key to consistent future gains.”

As for regional breakdown, only the West region reported a minor drop in month-over-month contract activity, while the other three major regions each saw pending home sales grow.

The pending home sales index in the Northeast rose 1.3 percent to 92.9 in January, 1.2 percent higher than a year ago. In the Midwest, the index increased 7.3 percent to 105.3 last month, 6.5 percent higher than in January 2019.

Pending home sales in the South grew 8.7 percent to an index of 129.4 in January, a 7.1 percent increase from January 2019. The index in the West declined 1.1 percent in January 2020 to 92.6, an increase of 5.5 percent from a year ago.

The pending home sales index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Enditem

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