By Peter Ricci

The Pending Home Sales Index, a prospective data set compiled monthly by the National Association of Realtors (NAR), increased by 10.4 percent in October, rising from 84.5 in September to 93.3 last month.

In addition, the index posted a yearly rise of 9.2 percent over October 2010, and increases were particularly strong in the Midwest, where the index shot up by 24.1 percent from September and 13.2 percent from October 2010.

Lawrence Yun, NAR’s chief economist, expressed optimism that this new data, which came after small declines in August and September, indicates a rising demand for houses in what is truly a buyer’s market.

“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,” Yun said. “We hope this indicates more buyers are taking advantage of the excellent affordability conditions.”

Numerous statistics support Yun’s claims of affordability. Prices are at their lowest level since 2003, according to the Case-Shiller 20-City Composite that was recently released, and interest rates, especially in the wake of the Federal Reserve’s “Operation Twist” financial stimulus program, have been at historic lows. The most recent data from Freddie Mac put the average 30-year fixed-rate mortgage at an incredible 4 percent.

In fact, homes are so affordable right now that it is cheaper to buy a property and pay a monthly mortgage than rent in many major cities. A recent Marcus & Millichap study, based on mortgage data for 30-year FRMs at a 4.5 percent rate, put Chicago’s average monthly mortgage at just $1,002, compared to an average monthly rent of $1,062.

“Many consumers are recognizing that home buyers in the past two years have had one of the lowest default rates in history” Yun said, highlighting further advantages to the home market. “Moreover, continued inventory declines are another healthy sign for the housing market.”