More Americans signed contracts to buy a home in July as pending home sales increased by 5.2%, according to the National Association of Realtors. This marks the first monthly rise since the post-buyer credit plummet in pending sales that occurred in May. Sales fell so far at that time, however, that even this gain will likely leave home sales at very depressed levels through at least September.

Here's how the NAR Pending Sales Index has changed since the recession began:  

pending home sales 2010-07.png

You can see, not including the past two months, July still recorded the worst index value over this time period. To put it in perspective, although the index was 5.2% higher than in June, it was down 19.1% compared to July 2009. That's even worse than June's 18.8% year-over-year decline.

The Pending Home Sales Index is a leading indicator. It shows how many contracts were signed -- unlike existing home sales, which shows how many home sales closed. So this helps to indicate the direction of existing sales in coming months. Generally, there's about a one- to two-month lag.

So how much does the 5.2% increase help? Not much. If you assume that existing home sales rise by the same amount in August -- and the probably didn't increase by as much, since pending sales declined in June -- then annualized sales are still barely 4 million. Here's how that looks, with the red bar added as a projection:

existing home sales proj 2010-07.png

As you can see, the 5.2% increase doesn't begin to imply that demand is again soaring on a historical basis. Existing sales would still be the second lowest in at least a decade.

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