"The trend is clearly upward," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The National Association of Realtors said Wednesday that resales increased 4.3 percent last month to a seasonally adjusted annual rate of 4.57 million.
Sales of single-family homes rose 3.8 percent. And the number of first-time buyers, who are critical to a housing recovery, increased slightly to make up 33 percent of all sales. That's still below 40 percent, which tends to signal a healthy market.
One concern is that the market is still saturated with homes at risk of foreclosure, which lower broader home prices. Those increased to make up 35 percent of sales.
But the supply of homes on the market has plunged to 2.3 million, the lowest level since March 2005. At last month's sales pace, it would take more than six months to clear those homes, consistent with a healthy housing market. Fewer homes on the market could help boost prices over time.
Most economists said the January report was encouraging, especially when viewed with other recent positive housing data.
Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might be open to buying this year - and they responded in January to that interest by requesting more permits to construct single-family homes.
"The rise in existing-home sales in recent months adds to the indication from housing starts, building permits, and homebuilder sentiment that the sector has improved modestly since the middle of 2011," said John Ryding, an economist at RDQ economics.
Much of the optimism has come because hiring has picked up. More jobs are critical to a housing rebound. In January, employers added 243,000 net jobs - the most in nine months - and the unemployment rate fell to 8.3 percent, the lowest level in nearly three years.
Analysts caution that the damage from the housing bust is deep and that the industry is years away from fully recovering. Since the bubble burst, sales have slumped under the weight of foreclosures, tighter credit, and falling prices. Many deals are also collapsing before they close.