Pending home sales in November increased 3.5% from the previous month, continuing a gradual recovery from the sharp drop in May, according to the National Association of Realtors. NAR's Pending Home Sales Index is a forward-looking indicator of the market based on contracts signed in November. While it has shown steady month-over-month growth since the summer, the index remains 5% below the level seen in November 2009. After the homebuyer tax credit expired in April, pending home sales plummeted 30% in May to an Index score of 77.6. Since then, new contracts pushed the Index to a 92.2 as of November. NAR Chief Economist Lawrence Yun said the market is still very affordable, but further gains in the economy are needed to reach normal levels of sales activity. "If we add 2 million jobs as expected in 2011, and mortgage rates rise only moderately, we should see existing-home sales rise to a higher, sustainable volume," Yun said. "Credit remains tight, but if lenders return to more normal, safe underwriting standards for creditworthy buyers, there would be a bigger boost to the housing market and spillover benefits for the broader economy." Yun projected pending home sales to rise 8% to 5.2 million in 2011 then another 4% in 2012 from 4.8 million in 2010. Yun also estimates the median price of an existing home could rise 0.6% to $173,700 in 2011, just above the $172,700 in 2010 and 2009. NAR expects new home sales to rise 24% to 392,000 for 2011 but will remain well below historic averages. Housing starts are also expected to see a double-digit increase by 21% to 716,000 next year. "As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2 to 3 percent in 2012," Yun said. November Pending home sales in the West jumped 18.2% and was the only area to have an increase from the year before. The Index dropped in the 1.8% in both the Northeast and the South. It slipped 4.2% in the Midwest. Meanwhile, prices for houses continue to slip, with Robert Shiller recently sounding alarm at the slide, especially considering annualized losses. Write to Jon Prior.