A forward-looking indicator based on pending sales of existing homes suggests the market may stabilize in the months ahead, the National Association of Realtors reported today.

Although the Pending Home Sales Index, based on contracts signed in June, was still 8.6 percent lower than a year ago, it rose 5 percent to 102.4 from the downwardly revised May index of 97.5. This is the largest monthly gain in more than three years, since a 6.1 percent increase in March 2004, according to NAR. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Overall mortgage application volume cooled again last week despite falling interest rates, the Mortgage Bankers Association reported today.

The market composite index, which measures total home loan volume, dipped 0.3 percent last week on a seasonally adjusted basis from the week before. The 1.8 percent decrease in the index that tracks home purchases slightly outweighed the 1.8 percent gain in the refinancing index, according to the report.

The refinance share of mortgage activity is now up to 39.4 percent of applications, and the adjustable-rate mortgage (ARM) share has reached 22.3 percent, MBA reported.