Home sales may pick up

NEW YORK (CNNMoney.com) -- Home sales could see an increase in the coming months, as the latest reading on the state of the battered U.S. real estate market from an industry trade group showed surprising strength.

The National Association of Realtors' pending home sales index jumped 5 percent to 102.4 in June, the group announced Wednesday. Economists surveyed by Briefing.com had forecast the index would slip 0.6 percent after a revised 3.7 percent drop in the May report.

It was the biggest increase in the index in three years. But that is up from a May reading that matches the second lowest on record. Only September 2001, the month of the terrorist attack, had a weaker pending home sales reading than May.

And even with the increase, the June reading is 8.6 percent below the June 2006 level, showing that there is still weakness in the market.

The index was created in 2001 to be a more forward-looking reading on home sales than the group's existing home sales report, which charts sales at the time of closing. The pending home sales index tracks when a sales agreement is signed, generally a month or two ahead of closing.

Even the Realtors weren't willing to state that the housing market has turned around, although it did say the pickup in the index is good news.

"It is too early to say if home sales have already passed bottom," said Lawrence Yun, the senior economist for the group in the report. "Still, major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand."

The report is a rare island of good news in a sea of other reports showing weakness in the housing market. Tuesday, Standard & Poor's/Case-Shiller Home Price Index showed further declines in home prices and values, and Wednesday, the Mortgage Bankers Association reported that applications for new mortgages fell to a five-month low. Other recent reports have shown declines in both existing and new home sales.

Still, the report was good news for worried U.S. financial markets, which have been tumbling for much of the past week on worries about housing and rising mortgage delinquencies and defaults. U.S. stocks, which had been lower before the pending home sales report, turned higher immediately after its release, but then quickly gave up those gains.