Though the National Association of Realtors announced today that sales of existing homes increased in July to their highest level since February, the data may not reveal just how many homes are being sold, or at what discounts.

The NAR, on Monday, reported a 3.1 percent increase in existing home sales, up to 5.0 million units (on a seasonally adjusted basis) in July from a 4.85 million unit sales pace in June. Sales are still 13.2 percent below where they were in July 2007, when the seasonally-adjusted sales pace was 5.76 million units.

The median sales price of an existing home decreased 1.26 percent from June to $212,400 for July. In July 2007, the median existing-home sales price was 7.1 percent higher at $228,600.

Currently, 40 percent of existing home sales are distressed sales: short sales, sales of homes that are delinquent on their mortgages, and those that have been foreclosed on. The NAR only counts sales where the home has been posted to the Multiple Listing Service. NAR spokesman Walter Maloney could not estimate the percent of distressed sales that are not listed in the MLS, and thus not counted in the NAR’s existing-home sale data. Some of these homes are being auctioned off or marketed privately, and never make it to the MLS.

“The actual volume of sales is a probably a bit higher than what we are reporting,” Maloney told Builder Monday.

Because the homes not being counted are being sold at significant discounts, the numbers may not reflect how far home-sale prices have fallen.

For July, the NAR reports that the total inventory of existing homes for-sale rose 3.9 percent to 4.67 million available units. By the NAR’s calculations, that represents 11.2 month’s supply of existing homes at the current sales pace.

The NAR, in a statement announcing its latest existing-home sales findings, said the increase in total inventory is due to an increase in the inventory of condominiums, and that the supply of single-family homes for-sale has declined.

Whether or not the inventory of single-family homes is decreasing, sales volume did pick up in July, fueled by increased existing-home sales in the West and Northeast. In the West, led by improving conditions in some California markets, existing-home sales rose 9.7 percent to 1.13 million seasonally-adjusted units.

Existing-home sales also increased by 5.9 percent in the Northeast, to an annual rate of 900,000 units for July.

But existing-home sales in the Midwest increased just 0.9 percent to a rate of 1.12 million units, and fell 0.5 percent in the South to a rate of 1.85 million annual sales.

Though inventory remains high, NAR chief economist Lawrence Yun said in a statement Monday that home prices may start to increase sooner rather than later.

“We expect more balanced conditions in 2009 and will eventually return to normal long-term appreciation patterns,” Yun said.

The U.S. Census will release its report on new-home sales tomorrow.