NEW YORK (

TheStreet

) -- Pending home sales, a leading indicator of future sales of existing homes, rose in February, signaling a pickup in sales activity.

The National Association of Realtors said Monday that the Pending Home Sales Index rose 2.1% in February after dropping 2.8% in January. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index at 90.8 is still 8.2% below the February 2010 reading, when a tax credit for home buyers was in place. However, the report noted that contract activity is 20% above the low point immediately following expiration of the home buyer tax credit.

"Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines," noted Lawrence Yun, chief economist of the National Association of Realtors.

Last week, the Commerce Department said

existing-home sales dropped 9.6% in February to a far worse-than-expected seasonally adjusted annual rate of 4.88 million units, according to the National Association of Realtors.

Sales of newly built homes plunged 16.9% in February to a seasonally adjusted annual rate of 250,000, the worst rate on record since 1962.

The report had a more favorable outlook for future existing home sales."We may not see notable gains in existing-home sales in the near term, but they're expected to rise 5 to 10 percent this year with the economic recovery, job creation and excellent affordability conditions providing confidence to buyers who've been on the sidelines," Yun said.

All regions showed a rise in pending home sales contracts except the NorthEast, which the report noted suffered extreme weather conditions.

The

SPDR Homebuilder ETF

(XHB) - Get Report

was rising 0.4%.

--Written by Shanthi Bharatwaj in New York

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