The monthly index released by the National Association of Realtors on Thursday showed that pending home sales rose 0.9 per cent in July from a year earlier.

The figure exceeded Wall Street's expectations. Economists expected pending home sales to fall 0.5 percent in July.

Compared to the same month last year, the number of sales is still down 14%.

Pending home sales reflect transactions in which a contract for the sale of an existing home has been signed but has not yet closed. Economists see this as an indicator of where existing home sales will go in the coming months.

The Big Picture: High interest rates and prices are discouraging many potential homebuyers, but those who need to buy a home or can afford to pay cash are still actively buying homes.

Sales activity was less active in July due to ongoing inventory issues and 30-year loan rates at or near the 7% range. With rates hitting a multi-decade high in August, the data is expected to continue to show a dragging real estate market.

Lawrence Yun, chief economist at the National Association of Realtors (NAR), said the small increase in contract signings shows potential for further growth given that many people are losing out on multiple offers to buy a home.

He added: "Employment opportunities are on the rise, thus expanding the pool of potential homebuyers." However, rising mortgage rates and limited inventory are temporarily hampering the possibility of many people purchasing a home.

MARKET REACTION: Stocks were up in early trading Wednesday. the 10-year Treasury note yielded about 4.1 percent.