The National Association of Realtors said the index on contracts of intention -- the legal space between paying a down payment and closing on a house -- rose 2.4 percent in the month, reaching the highest level in more than two years.
The index hit 101.7 in July, up from 99.3 in June and up from 90.5 in July 2011.
"While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity," said Lawrence Yun, NAR's chief economist in a statement.
"All regions saw monthly increases in home-buying activity except for the West, which is now experiencing an acute inventory shortage," he said.
The NAR said the pending home sales index rose 0.5 percent in the Northeast to 77.
The index rose 3.4 percent in the Midwest to 97.4. In the South it rose 5.2 percent to 111.7. In the West, the index slipped 1.7 percent to 109.9.
NAR forecast existing home sales to climb 8 percent to 9 percent in 2012 and increase another 7 percent to 8 percent in 2013.
Home prices are predicted to rise 10 percent cumulatively over the next two years, NAR said.
Starbucks testing smaller Frappuccinos