The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, climbed 1.1 percent to 108.6 in March from an upward revision of 107.4 in February. It's now 11.1 percent above March 2014 (97.7).
The index has increased year-over-year for seven consecutive months and is at its highest level since June 2013 (109.4).
"Demand appears to be stronger in several parts of the country, especially in metro areas that have seen solid job gains and firmer economic growth over the past year," says Lawrence Yun, NAR chief economist. "While (it's) certainly good news, the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news. It indicates this year's activity is being driven by more long-term homeowners."
Yun expects a gradual improvement in home sales in the coming months, but he says insufficient supply and accelerating prices could be a speed bump.
"Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer," Yun says. "This in turn has pushed home prices to unhealthy levels – nearly four or more times above the pace of wage growth in some parts of the country.
"Simply put, housing inventory for new and existing homes needs to improve measurably to improve affordability," Yun adds.
The PHSI in the Northeast fell (1.5 percent) for the fourth straight month to 80.2 in March, but it's 0.6 percent above a year ago. In the Midwest, the index declined 2.5 percent to 107.5 in March, but it's 11.3 percent above March 2014.
Pending home sales in the South increased 4.0 percent to an index of 126.5 in March and they're 12.4 percent above last March. The index in the West rose 1.7 percent in March to 103.7, and it's now 15.6 percent above a year ago.