Pending home sales rose sharply in May with all regions experiencing gains from a year ago, a signal that the housing market could improve through the second half of the year, the National Association of Realtors said Wednesday.

Pending sales, a forward-looking indicator based on contract signings, jumped 8.2 percent to 88.8 in May from an upwardly revised 82.1 in April, according to NAR. That is 13.4 percent higher than the 78.3 reading in May 2010.

“Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” said Lawrence Yun, NAR chief economist.

“Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30 percent from a year ago,” he said.

Those markets include Hartford, Conn.; Indianapolis; Minneapolis; Houston and Seattle.

Pending sales in the Northeast were up 7.3 percent, 4.4 percent above a year ago. The Midwest the index jumped 10.5 percent, 17.2 percent higher than May of last year.

In the South, pending home sales increased 4.1 percent, 14.6 percent higher than a year ago. In the West the index surged 12.9 percent, 13.5 percent above May 2010.

The data reflects contracts but not closings, which normally occur with a time lag of one to two months.

This is the first time since April 2010 that contract activity was above prior year levels, and the monthly gain was the strongest increase since last November, when the index rose 10.6 percent.

“Home sales still could be 15 to 20 percent higher,” Yun said. “If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector.”

Mortgage rates are in line to spur buying.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.46 percent from 4.57 percent,  the lowest 30-year rate recorded in the survey since the middle of November, the Mortgage Bankers Association said in its weekly Wednesday report.

A 15-year fixed-rate mortgage decreased to 3.64 percent from 3.70 percent, the lowest 15-year rate recorded in the survey since the beginning of November.

Meanwhile, mortgage applications decreased 2.7 percent from a week earlier, even as home loan rates dropped to their lowest levels in nearly eight months.

The Refinance Index decreased 2.6 percent while the seasonally adjusted Purchase Index decreased 3.0 percent in the week that ended June 24, according to data from the Mortgage Bankers Association.

Overall, the four-week moving average is up 0.7 percent, with refinancings showing a 1.5 percent increase, while purchases are down 1.5 percent.

The refinance share of mortgage activity increased to 69.5 percent of total applications from 69.2 percent the previous week.