(Bloomberg) -- Sales of previously owned US homes rose in January by the most in nearly a year as buyers took advantage of lower mortgage rates at the start of 2024.

Contract closings increased 3.1% from a month earlier to a 4 million annualized rate, after upward revisions to the prior four months, according to National Association of Realtors data released Thursday. While the pace is the highest since August, it’s still well below that seen in the years leading up to the pandemic.

Mortgage rates started out the year below 7%, continuing a months-long decline on expectations that the Federal Reserve will cut interest rates this year. However, officials have repeatedly indicated they’re in no rush to lower borrowing costs, which has sent mortgage rates higher in recent weeks.

After the resale market ended last year as the worst in nearly three decades, NAR sees sales rebounding in 2024 as rates are expected to come down.

“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” said NAR Chief Economist Lawrence Yun.

The number of previously owned homes for sale climbed to about 1 million last month, the highest for any January since 2021. At the current sales pace, selling all the properties on the market would take three months. Realtors see anything below five months of supply as indicative of a tight resale market.

Still, inventory remains relatively limited, which is keeping upward pressure on prices. The median selling price advanced to $379,100 from a year ago, the highest ever for January and marking the seventh month of year-over-year price gains.

Cash Sales

Cash sales represented 32% of total transactions, the highest in nearly 10 years. Yun noted that could be a factor to edge out other buyers in multiple-offer situations, and also observed that stock prices and home equity valuations are near record highs. Investors, who often purchase with cash and are therefore less sensitive to mortgage rates, made up 17% of the market.

Properties remained on the market for 36 days, up from 29 days in December and the highest since the start of 2020. Yun also said that distressed, or short sales, are starting to pick up but remain very low.

Existing-home sales account for the majority of purchases and are based on contract closings. Data on new-home sales, which reflect contract signings, are due next week. NAR revises its data back a few years every January to account for updated seasonal factors.

Separate data Thursday showed initial applications for US unemployment benefits fell to the lowest in a month last week, underscoring continued strength in the labor market that has helped sustain demand for housing.

--With assistance from Chris Middleton.

(Adds more information on sales and inventory starting in the sixth paragraph.)

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