Contracts to purchase previously owned U.S. homes climbed in March by the most in almost three years, showing residential real estate was starting to stabilize entering the spring selling season.

The pending home sales index rose 3.4 percent, the most since May 2011 and the first gain in nine months, after a 0.5 percent drop in February that was smaller than initially reported, the National Association of Realtors said today in Washington. The median projection in a Bloomberg survey of economists called for a 1 percent increase. The gauge is 7.4 percent below a year earlier.

Housing demand has weakened since the middle of last year as rising prices and borrowing costs put ownership out of reach for some prospective buyers. An improving employment outlook and easier access to credit would help entice more house hunters to sign purchase contracts.

“The housing market is on track to recover much like the broad-based recovery we’ve seen in the rest of the economic data,” Gennadiy Goldberg, a strategist with TD Securities USA LLC in New York, said before the report. “Some of it is based on improving fundamentals,” such as job and income growth, he said. “Consumers do have more money to spend and they’ll probably spend it on housing.”

Estimates in the Bloomberg survey of 35 economists ranged from a 2 percent decline to a 7 percent increase after a previously reported 0.8 percent drop in February.

Purchase contracts fell from the year prior after a 10 percent decrease in the 12 months that ended in February on an unadjusted basis. Existing-home sales are projected to total just over 4.9 million this year, less than the 5.1 million in 2013, the trade group said.

The pending sales index was 97.4. A reading of 100 is equal to the average level of contract activity in 2001, according to the Realtors group.

By Region

Three of four regions showed an increase from February, with contract signings up 5.7 percent in the West, 5.6 percent in the South and 1.4 percent in the Northeast. Pending sales dropped 0.8 percent in the Midwest.

Economists watch the pending sales report for clues to existing-home sales, which are tabulated when a contract closes a month or two after being signed.

“After a dismal winter, more buyers got an opportunity to look at homes last month and are beginning to make contract offers,” NAR chief economist Lawrence Yun said in a statement. “Sales activity is expected to steadily pick up as more inventory reaches the market, and from ongoing job creation.”

Sales of existing homes fell in March for a third consecutive month, dropping 0.2 percent to a 4.59 million annual rate, the lowest level since July 2012, the Realtors association said last week. Purchases were down 8.5 percent compared with the same month last year.

New Homes

New-home sales also retreated as buyers balked at record prices. Sales dropped 14.5 percent to a 384,000 annualized pace, the slowest in eight months, the Commerce Department reported last week. The median price of a new house climbed 12.6 percent from a year earlier to a record $290,000.

Mortgage rates have risen along with prices, reducing affordability. The average rate for a 30-year, fixed mortgage was 4.33 percent in the week ended April 24, compared with 3.4 percent a year earlier, according to Freddie Mac. Mortgage rates remain historically low, however. Since 1971, they’ve averaged 8.5 percent, peaking at 18.6 percent in 1981.

Harsh winter weather at the beginning of the year further slowed housing as snow and frigid temperatures stalled construction and kept some buyers indoors. A pickup in housing demand may prove difficult as first-time buyers struggle to obtain credit and builders design new homes for a higher-end market.

Higher Prices

Diminished sales haven’t made houses any cheaper. Builders including PulteGroup Inc. and D.R. Horton Inc. are raising prices and fewer are targeting first-time buyers.

At M/I Homes Inc., a Columbus, Ohio-based single-family homebuilder, the average price of properties under contract rose to $326,000 this year from $290,000 a year ago, Chief Executive Officer Bob Schottenstein said.

“While we continue to believe that housing is in the early stages of a multiyear recovery, the spring selling season has gotten off to a slower-than-expected start,” Schottenstein said on an April 24 earnings call.

“We continue to believe that we’re in the early stages of a housing recovery that will last a number of years,” he said. “We’re optimistic not just about our business, but we’re optimistic about macro housing conditions.”