Even though sales of existing homes dropped by 4.9 percent in January buyers were apparently out shopping and seriously so.  The National Association of Realtors® said that its Pending Home Sales Index (PHSI) climbed to 104.2 in January, a 1.7 percent increase from December and the highest level for the index since August 2013.

The January PHSI was 8.4 percent higher than the one for January 2014.  It was the fifth consecutive month of year-over-year gains and NAR said that each month has accelerated the annual gain from the prior month.  In addition the December number was revised upward from 100.7 to 102.5, erasing about half of the previously reported 3.7 percent November to December loss.

PHSI is a forward-looking indicated based on contract signings for home purchases.  These contracts generally close as sales within 60 days to 90 days.

Lawrence Yun, NAR chief economist, said that the elevated number of pending sales despite continuing tight supplies of available homes highlights the underlying demand that exists in today's market. "Contract activity is convincingly up compared to a year ago despite comparable inventory levels," he said. "The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth."

Yun also points to more favorable conditions for traditional buyers entering the market. All-cash sales and sales to investors are both down from a year ago, creating less competition and some relief for buyers who still face the challenge of limited homes available for sale.

"All indications point to modest sales gains as we head into the spring buying season," says Yun. "However, the pace will greatly depend on how much upward pressure the impact of low inventory will have on home prices. Appreciation anywhere near double-digits isn't healthy or sustainable in the current economic environment."

All major regions except for the Midwest saw gains in activity in January.  In the Northeast pending sales inched up 0.1 percent to 84.9 in January, and are now 6.9 percent above a year ago. In the Midwest the index decreased 0.7 percent to 99.3 in January, but is 4.2 percent above January 2014.

The South saw the largest increase, up 3.2 percent to an index of 121.9 in January and the highest level since April 2010.  The index was 9.7 percent higher than in January 2014. The index in the West rose 2.2 percent in January to 96.4 and is 11.4 percent above a year ago.

Total existing-homes sales in 2015 are forecast to be around 5.26 million, an increase of 6.4 percent from 2014. The national median existing-home price for all of this year is expected to increase near 5 percent. In 2014, existing-home sales declined 2.9 percent and prices rose 5.7 percent.