CAR's Pending Home Sales Index climbed 23% from a revised 82.4 in December to 101.4 in January, based on signed contracts. January's monthly increase was the highest since March 2009, and greater than the month-to-month long-run average of 12.8% in the past four years. Pending sales were up 1.4% from the 100 index recorded in January 2012.
Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.
"The strong increase in January's pending home sales is an encouraging indication that we'll kick off the spring home-buying season on a solid start," said CAR President Don Faught of Alain Pinel Realtors in Pleasanton.
"However, a low supply of available homes for sale will affect buyers, especially first-time buyers looking for more affordable, lower-priced homes since they are having to compete with investors and all-cash buyers," he added.
According to Faught:
* The share of equity sales -- or non-distressed property sales -- compared with total sales rose in January after a slight decline in December. The share of equity sales in January increased to 64.4%, up from 63.6% in December. Equity sales made up less than half (45.3%) of all sales in January 2012.
* The combined share of all distressed property sales dropped to 35.6% in January, down from 36.4% in December and down from 54.7% in January 2012.
* Of the distressed properties, the share of short sales was 21.5% in January, down from 25% in December and down from 25.9% a year ago.
* The share of REO sales rose from 11% in December to 13.7% in January but was down from 28.4% in January 2012.
In addition, the housing inventory remained in short supply in January, but loosened up slightly. The Unsold Inventory Index for REOs inched up from 1.9 months in December to 2 months in January. The January Unsold Inventory Index for short sales was 3.1 months, up from 2.4 months in December. The index for equity sales was 3.6 months in January, up from 2.7 months in December.