The Pending Home Sales Index rose 4.3 percent to 82.3 based on contracts signed in August from a downwardly revised 78.9 in July, but is 20.1 percent below August 2009 when it was 103.0. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said the latest data is consistent with a gradual improvement in home sales in upcoming months.

“Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market,” he said. “However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence.”

Although Yun expects a continuing steady rise in home sales from favorable affordability conditions and some job creation, he cautioned any sudden rise in mortgage rates could slow the recovery.

“Current low consumer price inflation has helped keep mortgage interest rates very attractive this year. However, recent rising trends in producer prices at the intermediate and early stages of production, along with very high commodity prices, are raising concerns about future inflation and future mortgage interest rates,” he said. “Higher inflation would mean higher mortgage interest rates. In the meantime, housing affordability is hovering near record highs.”

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The Mortgage Bankers Association said Wednesday its refinancing index jumped 17% to 4676.70 in the week to Wednesday, soaring to the highest since May 2009. The four-week average increase rose to 3.2%. This abrupt spike is a sign that mortgage rates have fallen far enough to incentivize a new wave of refinancing from homeowners. According for Freddie Mac, the average rate for a 30- year home loan dropped to 4.4A% last week.

This wave could also be a great sign for the U.S. economy as a whole, not just the housing market. Morgan Stanley estimates that if 50% of mortgages in mortgage-backed bonds are refinanced, it would free up $46 billion a year for consumers. $46 billion is more money than the last extension of unemployment benefits.

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2009 CONFORMING LOAN LIMITS INCREASED BY AMERICAN RECOVERY AND REINVESTMENT ACT

Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.

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