pendingWASHINGTON—A forward-looking gauge of U.S. home purchases rose for the third straight month in March, a sign of firming demand in the housing market.

The National Association of Realtors said Wednesday its pending home sales index, which is based on contract signings for purchases of previously owned homes, increased 1.1% to a seasonally adjusted level of 108.6 in March from an upwardly revised reading of 107.4 in February.

Economists surveyed by The Wall Street Journal had expected pending home sales would rise 1% in March. Home sales typically close within a couple months after signing.

The index rose 11.1% in March from a year earlier.

Lawrence Yun, NAR’s chief economist, said the jump in sales from a year earlier is good news, but “the increased number of traditional buyers who appear to be replacing investors paying in cash is even better news.”

By Kate Davidson at www.WSJ.com