The number of signed contracts for home purchases declined in April, dropping 5.5% from a downwardly revised March estimate, according to data released today by the National Association of Realtors (NAR). The drop brought the association’s Pending Home Sales Index to a reading of 95.5.

However, contract signings remained 14.4% higher year-over-year, and April was the 12th consecutive month to report an annual improvement. "Housing market activity has clearly broken out at notably higher levels and is on track to see the best performance since 2007," said Lawrence Yun, NAR’s chief economist, in a statement discussing the numbers today.

Yun anticipates the improvement in demand will lift prices by between 3% and 5% on a national level by the end of this year. Were that to happen, he says, the number of homeowners underwater on their mortgages would drop to around 9 million, from 12 million at the beginning of 2012.

Conversions from contracts to closings could be jeopardized by cancelations, which have spiked as credit conditions have tightened. NAR ceased publishing cancellation rates last month, but earlier this year the number of Realtors reporting cancelled contracts stood above 30%, compared to 9% the previous year.

See the NAR’s full Pending Home Sales Index report.

Claire Easley is a senior editor at Builder.

Learn more about markets featured in this article: Greenville, SC.