NEW YORK - Pending sales of existing U.S. homes rose sharply in August, for a seventh consecutive month of gains, reaching the highest since March 2007, data from a real estate trade group showed on Thursday.

The National Association of Realtors Pending Home Sales Index, based on contracts signed, was up 6.4 percent to 103.8, the longest consecutive month-on-month gain in the history of the series, which began in 2001.

The index rose from a reading of 97.6 in July and is 12.4 percent above August 2008's level of 104.5.

Economists polled by Reuters had been expecting pending home sales to rise, but by only 1.0 percent.

NAR senior economist Lawrence Yun noted that not all contracts are turning into closed sales within an expected timeframe.

The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules, he said in a statement.

(Reporting by Julie Haviv; Editing by James Dalgleish)