Contracts to buy US previously owned homes rose by the most in more than 2½ years in January, but a resurgence in mortgage rates could delay a much-awaited housing market turnaround.

The National Association of Realtors (NAR) said on Monday its Pending Home Sales Index, based on signed contracts, jumped 8.1 per cent last month, the biggest increase since June 2020. Economists polled by Reuters had forecast contracts, which become sales after a month or two, rising 1.0 per cent.

Contracts increased in all four regions. Pending home sales decreased 24.1 per cent in January on a year-on-year basis.

“Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur,” said NAR chief economist Lawrence Yun.

The housing market has been walloped by the Federal Reserve’s aggressive monetary policy stance, with residential investment contracting for seven straight quarters, the longest such stretch since 2009. Despite signs the worst is over, it could take a while for the housing market to turn around.

Government data on Friday showed new home sales jumped to a 10-month high in January. But mortgage rates have resumed their ascent after robust consumer spending and labour market data as well as strong monthly inflation readings raised the prospect of the US central bank hiking interest rates into the summer.

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The 30-year fixed mortgage rate increased to an average of 6.50 per cent last week from 6.32 per cent in the prior week, according to data from mortgage finance agency Freddie Mac. The third straight weekly increase lifted the rate to a three-month-high. REUTERS