In January, better-than-expected number of Americans signed contracts to purchase homes. The increase in number of signed contracts has hit an 18-month high. This means that home sales will increase after a slow start in the beginning of the year.

As per the National Association of Realtors, last month, its seasonally adjusted pending home sales index rose 1.7% to 104.2. In December also, there was a decline of only 1.5%, which was significantly better than earlier estimation of 3.7% fall. At present, the index is 8.4% above its level a year earlier.

"All indications point to modest sales gains as we head into the spring buying season. However, the pace will greatly depend on how much upward pressure the impact of low inventory will have on home prices", said Lawrence Yun, NAR chief economist.

The data indicates a bounce back in sales of existing homes in the next few months, especially as the spring buying season is about to start. Last month, a decline in measures of sales and construction was observed, which led to concerns that the housing market could further suffer after weak 2014. However, economists are now looking forward to low mortgage rates, strong job gains and increased consumer confidence.