The National Association of Realtors (NAR) said on Wednesday its Pending Home Sales Index, based on signed contracts that become sales after a month or two, rose 0.9% to 77.6 in July versus a revised 0.4% increase in June. The uptick in pending home sales topped the forecast for a 0.6% decrease in a Reuters poll of economists.

Pending sales fell by 14% year-over-year, but at a slower rate than the month prior. Wednesday's report suggested that the housing market is starting to recover from a period of rapid decline that began when the Federal Reserve initiated an aggressive interest rate hiking campaign in March 2022.

The supply of existing homes is still at historically low levels, as many current home owners have mortgage rates locked in below 5%.

The shortage has created pent-up demand for housing that could contribute to increased transactions in the coming months, according to Lawrence Yun, the NAR's chief economist.

“Jobs are being added and, thereby, enlarging the pool of prospective home buyers. However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many," said Yun.

Federal Reserve Chair Jerome Powell said more interest rate hikes could be on the table if the labor market and consumer spending continue to prop up inflation, a scenario that would mean mortgage rates, at their highest in more than two decades, could stay elevated.