Signs of major disruptions in the housing market were seen in July. The National Association of Realtors reported Wednesday a 12.2% monthly decline in contract signings on existing homes. This is the largest drop since the pending homes sales index started in 2001,

This is also the lowest level since September 2001 and pending sales were 16.1% lower than that of July last year. The July data reflect trends before August's mortgage meltdown.

According to Ian Sheperdson, chief U.S. economist with High Frequency Economics Ltd., is a statement. July’s plunge indicates the June rebound was a “fluke,” where the index gained a 5% increase.

“This is disastrous” Shepherdson said. "Note that this collapse in pending home sales predates the turmoil in the markets and the subsequent jump in jumbo mortgage rates, even for prime borrowers," he added.

The drop in pending home sales was evident in all four major regions of the U.S., according to NAR. In July, pending sales decreased 13.1% in the Midwest, 6.6% in the South, 20.8% in the West and 12.2% in the Northeast.

Other data have shown that the housing market has continued to weaken throughout the summer. . In July, inventories were at their highest level in 16 years. Inventories of unsold single-family homes are moving higher, while prices have fallen.

The future is uncertain with abnormal factors clouding the horizon, said Lawrence Yun, NAR senior economist, in a statement.

"It's difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren't closing because mortgage commitments have been falling through at the last moment," he said.

Yun added that the problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers.

A sale is considered "pending" when the contract is signed. The NAR marks it as "sold" when the sale closes, usually within two months. The pending home sales data are volatile and have not "given any reliable leading information," said Stephen Gallagher, U.S. economist for Societe Generale.

The NAR will report on existing sales for August on Sept. 25. In July, the annualized sales rate fell to a five-year low of 5.75 million.