WASHINGTON – Sales of previously owned homes in the United States rose for the third straight month in January at a pace topping year-ago levels, a key trade group reported Wednesday.

The National Association of Realtors said existing-home sales rose 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January.

The sales rate over the past three months "is now above year-ago levels," the NAR said.

Most analysts had expected existing-home sales to dip to 5.23 million.

Sales were 5.3 percent higher than in January 2010.

"This is the first time in seven months that sales activity was higher than a year earlier," the trade association said in its report.

The brisk sales of previously owned homes, the lion's share of the US housing market, were fueled by all-cash purchases as investors snatched up homes at bargain-basement prices more than three years after the market bubble collapsed.

"The uptrend in home sales is consistent with improvements in the economy and jobs, which are helping boost consumer confidence," said Lawrence Yun, NAR chief economist.

But he cautioned that the improvement, though welcome, could be better.

"The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity," he said.

A separate NAR study showed that investors made up 23 percent of purchases in January, up from 17 percent a year ago.

All-cash sales rose to a record 32 percent of purchases, the highest level since NAR started tracking them monthly in October 2008, when they accounted for 15 percent of the market.

"With tight credit standards, it's not surprising to see so much activity where cash is king and investors are taking advantage of conditions to purchase undervalued homes," Yun said.