Pending home sales increased in June according to an industry report released Tuesday. The rise is the fifth straight month indicating a positive sign that the battered housing sector is on its way to recovery.

The National Association of Realtors Association said the Pending Home Sales Index increased 3.6 percent to 94.6 in June from a 91.3 reading in May.

It was the longest streak that the index increased for five straight months since 2003. The index includes signed contracts to purchase previously owned homes and is considered a measure future home sales activity with a 4 to six weeks lag between contract signing and completion of the deal.

Pending homes sales in June increased in all regions: in the South up 7.1 percent, in the West up 2.9 percent while in the Midwest and Northeast with 0.8 percent and 0.4 percent respectively. "It appears home sales are on a sounder footing and inventory is gradually being absorbed," Lawrence Yun, NAR’s chief economist in a statement.

"Historically low mortgage interest rates, affordable home prices and large selection are encouraging buyers who've been on the sidelines," said Yun, "Activity has been consistently much stronger for lower priced homes."

The NAR attributes the increase in pending home sales to the $8,000 tax credit for first-time home buyers that can be used for a down payment is also encouraging buyers.

Yun expects existing-home sales to "gradually rise" over the year.