NEW YORK (CNNMoney.com) -- Home sales continued their modest upward swing in May, according to a closely watched industry report that rose for the fourth straight month for the first time in nearly 5 years.

The Pending Home Sales Index, reported Wednesday by the National Association of Realtors (NAR), rose 0.1% during the month. The index was up 6.7% compared with May 2008. It was the first four-month run up in the pending sales measure since October 2004

Industry prognosticators had forecast no growth at all in the index for the month, according to Briefing.com, expecting it to settle back after ramping up 6.7% in April.

But the rise in sales contracts may not yield a like increase in completed sales, according to Lawrence Yun, chief economist for NAR.

"Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," he said.

Many industry insiders have complained that home appraisals are being too often based on values of foreclosed properties, which sell for significantly less than the homes of ordinary sellers.

The banks that have repossessed the foreclosed homes are anxious to sell and accept offers at large discounts than comparable homes not in foreclosure.

"We see that distressed homes often are selling for 20% less than normal homes in the same area, but some appraisals don't distinguish between traditional homes and distressed property," said NAR President Charles McMillan, a broker in Dallas-Fort Worth.

Overall, home sales are still slow, about a third below the peak years of 2005 and 2006.

The market will probably not rebound very fast, according to Robert Dye, a senior economist with PNC Financial Services, the Pittsburgh-based bank

"[The May number] is not a robust indicator of future market expansion," he said. "Taken with the April number, it points to a gradual but slow recovery."

One factor favoring a rebound is lower home prices. NAR's Housing Affordability Index remains near historic highs, although it declined in May to 171.6 from 178.8 a month earlier, mostly due to higher interest rates. April was the high point for the index, which dates back to 1970.

"Under these conditions the typical family would devote only 14.6% of gross income to mortgage principal and interest, which is one of the lowest percentages on record," said Yun.

"If rates hadn't crept up, we may have seen a better number [for the May index]," said Dye.

Still, many other economic factors are decidedly negative, pointed out Dye. Consumer confidence is low, unemployment is up and prospects for more layoffs, work furloughs and slashed hours high.

"Market conditions are still poor," he said.