Pending home sales rose in January and continued a 21-month trend of growing from year ago levels, the National Association of Realtors said.

The company's latest pending home sales index suggests the housing recovery is gaining momentum.

The January NAR Pending Home Sales Index hit its highest reading since April 2010 when the index reached 110.9. Aside from spikes induced by homebuyer tax credits in 2010, the last index high before 2010 occurred in February 2007 when NAR's index reached 107.9, the association said.

The NAR pending home sales index – which measure contract signings on homes – increased 4.5% to 105.9 in January, compared to a score of 101.3 in December. That index score is also still 9.5% above January 2012 when the index hovered at 96.7. 

The data reflects only signed contracts, not actual property closings.

Inventory is the key to this year’s housing market, said Lawrence Yun, NAR’s chief economist.

"Favorable affordability conditions and job growth have unleashed a pent-up demand. Most areas are drawing down housing inventory, which has shifted the supply and demand balance to sellers in much of the country," Yun said. 

He added, "It’s also why we’re experiencing the strongest price growth in more than seven years."

Furthermore, the association stated there were healthy monthly gains in all regions accept for the West, which continues to struggle with limited inventory.

On a regional basis, pending home sales rose the most in the Northeast, increasing 8.2%, a significant uptick compared to December when pending home sales fell 5.4%.

In the Midwest, the pending home sales index rose 4.5% from December to January and is 17.7% above year ago levels.

The South saw a 5.9% increase in pending home sales, while the West index of pending home sales edged up 0.1%.

"Over the near term, rising contract activity means higher home sales, but total sales for the year are expected to rise less than in 2012, while home prices are projected to rise more strongly because of inventory shortages," Yun said.