Pending home sales rose strongly in October and remain above year-ago levels, according to the NATIONAL ASSOCIATION OF REALTORS®.

The Pending Home Sales Index, which measures home sales contracts, surged 10.4% to 93.3 in October and is 9.2% above October 2010.

Improved contract activity is a hopeful sign that the real estate market is recovering, said NAR chief economist Lawrence Yun. “Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows and there is a pent-up demand from buyers who normally would have entered the market in recent years,” he said. “Moreover, continued inventory declines are another healthy sign for the housing market,” Yun added.

Regional home sale contracts

Pending home sales in the Northeast surged 17.7% in October and is 3.4% above October 2010. In the Midwest, the index jumped 24.1% in October and remains 13.2% above a year ago. Pending home sales in the South rose 8.6% in October and are 9.7% higher than October 2010. In the West, the index slipped 0.3% in October but is 8.1% above a year ago.

“Although contract signings are up, not all contracts lead to closings,” Yun said. “Many potential home buyers inadvertently hurt their credit scores and chances of getting a mortgage through easily averted actions, such as cancelling an old credit line while taking on a new one. Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close the margins of qualifying, or they might get a loan but with less favorable terms.”