A housing market in desperate need of some good news has a little today. Pending home sales increased in March. The National Association of Realtors' Pending Home Sales Index rose 5.1% to 94.1 -- the most since November of last year. Pending sales consist of contracts signed, but deals not yet closed, so they serve as a leading indicator for the housing market. Over the past several months, progress in home sales has been quite weak. Could this mark a change?

Looking at some history helps get the big picture:

pending home sales 2011-03.png

As you can see, pending sales dipped during the winter, but in March they jumped. Although you can't exactly call last month's rate of pending sales strong, they have certainly strengthened from the beginning of the year. If the growth continues into April, pending sales should hit a new post-home buyer credit high.

So what drove the increase last month? According to the regional breakdown, the South played a major role in the month's jump. In that region, pending sales were the highest they've been since before the home buyer credit expired in April 2010. The South and the West are both approaching the index levels seen a year earlier, when that stimulus program was in place. In the Northeast and Midwest, sales remain down more significantly year-over-year.

Of course, we can't get excited yet. Home sales are choppy, as the chart above shows. We could see another decline for April. But if the sales growth continues from here, that will be very good news for the housing market. If demand is rising, then buyers will burn through all of that distressed in inventory more quickly.

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