Pending sales of existing U.S. homes fell in July from June in the latest sign of weakness in the housing industry, data from a real estate trade group showed on Monday.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in July, was down 1.3 percent to 89.7 from 90.9 in June.

Economists polled by Reuters ahead of the report were expecting pending home sales to fall 1.3 percent.

In a sign of how much the sector has recovered from a year ago, the index was up 14.4 percent from July of 2010.

The association's senior economist Lawrence Yun said the latest monthly reading shows sales activity is underperforming but that underlying factors for sales were improving.

He cited rising rents and record affordability conditions as factors that could point to future growth.

It is now a question of lending standards and consumers having the necessary confidence to enter the market, he said.

(Reporting by Jason Lange; Editing by Andrea Ricci)