The Pending Home Sales Index (PHSI) rose sharply in March to 101.4 from February’s revised 97.4, theNational Association of Realtors (NAR) reported Thursday.

Economists had expected the index to increase 1.0 percent from February.

The index is now at the highest level since April 2010 when it reached 111.3.

The index improved for the third straight month and fifth time in the last 6 months. The March reading is up 12.8 percent from March 2011, the strongest year-over-year gain since last July when the index was 15.4 percent over its year-earlier level.

Pending home sales are counted when sales contracts are signed and are viewed as a leading indicator of existing home sales; recent reports suggest that home re-sales should be a bit stronger over the next couple of months but at a level that is still fairly subdued. March pending sales would be included in the home sales report for May.

In January, the PHSI rose to 97.0 from 95.1, but existing-home sales in March fell to 4.48 million (seasonally adjusted annualized rate) from an upwardly revised February rate of 4.60 million. Based on the increase in thePHSI, economists had forecast the March sales pace would be 4.62 million.

In March, the PHSI rose 8.7 percent in the West and 5.9 percent in the South while slipping by less than one percent in both the Northeast and Midwest.

The PHSI has been drifting upward, albeit modestly for most of the past two years.

The March gain is consistent with the beginning of the traditional home buying season and tempered by the reality that a substantial number of sales contracts are failing to meet underwriting standards and/or other loan criterion as sales contract cancellations remain elevated.

Although a hopeful movement, home sales still appear to be searching for a sustainable level and continue to be subject to conflicting trends in labor markets, household formation, mortgage interest rates, and underwriting standards.

Nonetheless, the increase was cheered by Lawrence Yun,NAR chief economist.

“The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” Yun said.

The index is based on a large national sample, representing about 20 percent of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.