Real Estate Investment: Return on Investment and Cash Flow Calculation

Home contract signings rose more than expected in August, a sign that lower mortgage rates may be pushing some buyers and sellers back into the market.

The Pending Home Sales Index rose 4% in August from a month earlier to 74.7, according to National Association of Realtors data released Monday. Economists expected a much more modest 0.4% gain. A level of 100 is equal to contract activity in 2001.

Contract signings are up 3.8% from a year ago. Month over month, signings rose in the Midwest, South, and Western US, while they declined in the Northeast.

Homes usually go under contract a month or two before they are sold, and while some deals fall through in the contract period, pending home sales can be an early indication of future sales activity.

The housing market is spending its third straight year in a deep slump as mortgage rates stay elevated and prices remain high, leaving many buyers on the sidelines. So far this year, home sales are on track to hit a 30-year low, but there is some hope that falling mortgage rates could spur more activity this fall.In recent months, 30-year fixed mortgage rates have been falling. After spending much of the year stuck around 6.7%, rates are now averaging closer to 6.3%, according to Freddie Mac data.

“Lower mortgage rates are enabling more homebuyers to go under contract,” NAR Chief Economist Lawrence Yun said in a statement.Contract activity is rising fastest in the Midwest, with signings up 8.7% since July and 6.7% in the last year. The region’s relative affordability is likely attracting more buyers, Yun said.

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.