Pending home sales jumped in October to their highest level in almost a year, an encouraging sign that pent up consumer demand building over the past several years could finally translate into meaningful improvement for the housing market.
Pending sales, which reflect contract signings not closings, were up more than 10 percent in October and more than 9 percent above last year's numbers, according data released Wednesday by the National Association of Realtors.
[Read: Home Prices Decline Again.]
"This is a forward-looking indicator of what's likely to happen with completed home sales," says Jed Kolko, chief economist at real estate website Trulia. "It points to a bump in seasonally adjusted home sales for the rest of the year."
Regionally, the Midwest saw the biggest bump in pending home sales over the past year followed by South and the West. The Northeast region saw the smallest increase year-over-year, with pending sales up only about 3.5 percent.
"[The Northeast] is a region where prices have fallen less than in other places," Kolko says. "In other places the bigger decline in home prices has been encouraging more sales, that's why we see less of an increase in the pending home sales in the Northeast."
But there is a caveat that complicates this month's heartening numbers. As seen in existing home sales numbers for the past several months, not all contracts lead to closings. Many obstacles still exist for would-be homebuyers even after they reach an agreement with a seller.
"The share of contracts that cancelled has been unusually high, which means that more pending home sales don't translate into completed home sales," Kolko says. Contract failures jumped to 33 percent in October, up from 18 percent in September, primarily due to declined mortgage applications and employment loss.
Still, experts hope the uptick in pending home sales means consumers are finally taking advantage of the excellent affordability conditions in the housing market today.