A key housing market indicator is looking up: Buyers nationwide signed more contracts on existing homes in February.

The National Association of Realtors Pending Home Sales index climbed 1.6% to 75.6 last month. The growth comes after the index fell 4.9% to 74.3 in January.

Contract signings surged in the Midwest and the South while declining in the Northeast and West.

Since last year, pending transactions have dropped 7% across all U.S. regions.

"While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” NAR Chief Economist Lawrence Yun said in a statement. “Ongoing job gains are clearly increasing demand along with more inventory."

The index tracks housing market activity by measuring the number of signed contracts for existing home sales. It typically leads final sales data by a month or two by accounting for homes that are under contract.

In the Northeast, the index dipped 0.3% from January, marking a 9% decrease since the same time last year. Similarly, the West index plummeted 6.5% in February — a loss of 7.9% since last year.

"The high-cost regions in the Northeast and West experienced pullbacks due to affordability challenges,” Yun said. “Home prices rising faster than income growth is not healthy and adds challenges for first-time buyers."

At the same time, the Midwest index jumped 10.6% in February, though it remains 2.5% lower than this time last year. In the South, the index climbed a modest 1.1%, and it remains 8.5% lower than February 2023.

"There will be a steady rise in inventory from recent growth in home building," according to Yun. "Additionally, many sellers, who delayed listing in the past two years, will begin to put their homes on the market to move to a different home that better fits their new life circumstances — such as changes in family composition, jobs, commuting patterns and retirees wanting to be closer to their grandkids."

The increase comes as higher mortgage rates, elevated home prices and a shortage of supply continue to deter homebuyers.

As of March 21, the 30-year-fixed rate stood at 6.87%, according to mortgage finance giant Freddie Mac. That’s higher than the four-week average of 6.86% and comes after a few weeks of slight decreases.

Mortgage applications decreased 0.7% during the week ended March 22, marking the second consecutive week of declines, according to the Mortgage Bankers Association's weekly survey released March 27.

Lower rates were "not enough to stimulate borrower demand," according to Joel Kan, MBA's vice president and deputy chief economist, said in a statement.

At the same time, home prices are jumping.

In January, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index clocked a 6% annual increase, according to a report released March 26. The index climbed 5.6% month-over-month, according to the index.

The latest data is the second consecutive month of annual increases in all cities included in the 20-city composite index.

"On a seasonal adjusted basis, home prices have continued to break through previous all-time highs set last year,” Brian D. Luke, head of commodities and real and digital assets at S&P Dow Jones Indices, said in a statement. “On a monthly basis, home prices continue to struggle in the face of elevated borrowing costs."

Despite these indicators, existing home sales in February saw the biggest monthly increase in a year, climbing 9.5%, according to NAR data. Still, on a year-over-year basis, sales are down 3.3%.