Pending home sales fell by 3.5 percent in December from 19-month high after gaining 7.3 percent the previous month, figures from the National Association of Realtors showed today.

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Contract signings in the final two months of 2011 were still the strongest since March-April 2010, thanks to November’s gains, as record-low mortgage rates and an improving job market boosted buyer confidence.

However, an increase of foreclosures is increasing the supply of unsold homes on the market, which could hinder the recovery of the industry at the heart of the last recession.

Three of four regions measured by the NAR showed a decrease in contract signings from a month earlier, with only the Midwest posting gains.

“Housing affordability conditions are too good to pass up,” NAR chief economist Lawrence Yun said in a statement accompanying the release. “Our hope is lending conditions will gradually improve with sustained increases in closed existing-home sales.”

Economists consider pending home sales a leading indicator of market sentiment and the direction the market is headed, while existing home sales aren’t tabulated until a contract closes, usually a month or two later. However, not all contract signings result in a sale, as many potential buyers change their minds or find themselves unable to secure a loan …

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