Pending home sales took a big jump in October, surging 10.4 percent above October figures and ending 9.2 percent higher than one year earlier.  The Pending Home Sales Index issued by the National Association of Realtors® (NAR) rose from 84.5 in September to 93.3.  One year ago the index stood at 85.5.

The Index is a measure of home purchase contracts written but not closed during the subject month and is a forward indicator of future sales.  Closings are generally expected to follow within one to two months.  Realtors, however, have been reporting unusually high levels of contract cancellations in recent months.

Lawrence Yun, NAR chief economist, said improved contract activity is a hopeful sign.  "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.  We hope this indicates more buyers are taking advantage of the excellent affordability conditions," he said.

The Midwest region saw the greatest appreciation in signed contracts, up 24.1 percent to 88.7 in October and 13.2 percent higher than in October 2010.  In the Northeast pending sales were up 17.7 percent to 71.3 and are 3.4 percent higher than a year earlier.  The South rose 8.6 percent in October to an index of 99.5, an increase of 9.7 percent year-over-year.  In the West the index slipped 0.3 percent to 105.5 in October but is 8.1 percent 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," Yun said.  "Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close to the margins of qualifying, or they might get a loan but with less favorable terms."

The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales.  An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it thus coincides with a level that is historically healthy.