Sales of previously occupied homes rose modestly from April to May, the third monthly increase this year, but signs of a housing recovery are fragile at best.

The National Association of Realtors said Tuesday that home sales rose 2.4 percent to a seasonally adjusted annual pace of 4.77 million, up from a downwardly revised rate of 4.66 million in April. The results, however, missed analysts' expectations and stock markets edged lower on the news.

"While activity has stabilized, a meaningful recovery has yet to begin," wrote Paul Dales, U.S. economist with Capital Economics.

The bursting of the housing bubble helped push the U.S. economy into the worst financial crisis in seven decades. Now the economy is hindering the recovery of the real estate market. As companies continue to shed jobs, more cash-strapped homeowners are predicted to go into foreclosure.

About one in three homes sold last month was a foreclosure or distressed sale, dragging down the median price to $173,000 — 16.8 percent below a year ago. Falling prices coupled with new rules for property appraisers have caused many transactions to fall apart or be delayed.

"We have just been flooded with e-mails, telephone calls on the appraisal problems," said Lawrence Yun, the Realtors' chief economist.

One bright spot, however, was that the number of unsold homes on the market at the end of May fell 3.5 percent to nearly 3.8 million. That's a 9.6 month supply at the current sales pace, compared with about 6 months in a normal market.

That drop was "the best news in the report," said Joseph LaVorgna, Deutsche Bank's chief economist.

Still, the inventory figures don't reflect the large number of houses being held off the market by owners reluctant to sell while prices are so weak, noted Richard Moody, chief economist with Forward Capital.

Mortgage rates are another problem. Interest rates for 30-year home loans, which fell to all-time lows this spring, have been edging back up. The average rate was 5.38 percent last week, according to Freddie Mac.