The National Association of Realtors' index of contract signings increased 8.3% to 77.3 after holding at a record low a month earlier, according to data out Friday. Last month's advance — the largest since mid-2020 — exceeded all estimates in a Bloomberg survey of economists.

"The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices," Lawrence Yun, NAR's chief economist, said in a statement. "Job additions and income growth will further help with housing affordability, but increased supply will be essential to satisfying all potential demand."

While 30-year fixed mortgage rates remain below 7%, a sustained decline is needed to encourage more homeowners to list homes that are financed at much lower levels. Until that develops, a limited inventory of previously owned homes will make it difficult for the resale market to rapidly gain traction.

A lack of listings have also worked to keep existing-home prices elevated. At the same time, builders have been filling the void with new construction. The number of new houses for sale at the end of 2023 rose to a more than one-year high, helping push those prices down.

The pending-home sales report is a leading indicator of existing-home sales given houses typically go under contract a month or two before they're sold. Those sales are expected to increase 13% this year, according to NAR's economic outlook. They slumped 18.7% in 2023.

The NAR's report showed the index of contract signings for existing homes jumped nearly 12% in the South, the biggest US housing market. That was the largest advance since June 2020. Pending sales also surged 14% in the West and climbed 5.6% in the Midwest.