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Updated: June 26, 2012, 10:16 PM ET

By Chad Ford and Marc Stein | ESPN.com

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The Minnesota Timberwolves have traded the 18th pick in the 2012 NBA draft to the Houston Rockets for Chase Budinger and the draft rights to Lior Eliyahu.

The Houston Chronicle earlier reported the trade agreement.

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The Rockets have been discussing deals with several teams in the top 10 about moving up in the draft. Adding the 18th pick should give them even more ammunition.

Although sources stressed that no deal is imminent, the Rockets have had substantive discussions about sending their other two first-round picks (Nos. 14 and 16) to the Sacramento Kings for the No. 5 pick. The Rockets also have been exploring moving point guard Kyle Lowry to a team in the top 10 to acquire another pick.

Sources say the Rockets are hoping to acquire enough assets to entice the Magic to trade Dwight Howard to them.

The Rockets' willingness to trade for Howard -- even without the All-Star center's signature on a contract extension -- is an open secret around the league. But it's believed that two top-10 picks, assuming Houston managed to complete trades with Sacramento and another team, would seriously pique the interest of new Magic general manager Rob Hennigan, who then could quickly start to follow the same sort of roster-building blueprint relied on by his previous employer in Oklahoma City.

Acquiring those early lottery picks, though, represents only half of Houston's challenge if Howard is indeed the Rockets' target.

The other hurdle is convincing Hennigan, who hasn't even been on the job for a week, to part with Howard so quickly. As much as the GM has been schooled in building through the draft while working alongside Thunder GM Sam Presti, Hennigan could opt to take a more measured approach, making one more run at convincing Howard to sign an extension before entering the final year of his contract, and then trading him later in the summer if those efforts go nowhere.

Although several rival teams now believe the Rockets are determined to stockpile a fistful of first-round draft picks to offer Orlando for Howard, sources say there are other established players they're interested in acquiring. One of them, sources say, is Atlanta Hawks swingman Josh Smith, who happens to be one of Howard's closest friends.

The Timberwolves see themselves as a team on the rise behind coach Rick Adelman, point guard Ricky Rubio and power forward Kevin Love. The Wolves faded late last season after Rubio went down with a knee injury, exposing the roster as one with too many point guards, power forwards and centers and not enough playmakers and shooters on the wings.

Michael Beasley struggled with injuries and inconsistency, Wes Johnson couldn't find his shooting stroke and Martell Webster never got fully into the groove after preseason back surgery.

Budinger should help. He averaged 9.6 points, 3.7 rebounds and shot 40.2 percent from 3-point range in his third season with the Rockets. The former second-round pick out of Arizona played his first two seasons under Adelman in Houston, so he has familiarity in the coach's corner offense and has demonstrated the ability to knock down open jump shots.

"Chase knows Rick Adelman's system well after playing for him in Houston, and he will be a good fit on our team," Timberwolves president David Kahn said in a statement issued by the team.

The 6-foot-7 Budinger, who has participated in the slam dunk contest during All-Star Weekend, also has the athleticism to get to the basket and a knack for moving without the ball.

"Chase was an integral part of our team in Houston my last two years as coach there," Adelman said. "He will help our perimeter game with his athleticism and shooting ability. Chase's game has improved in each of his first three seasons in the NBA and we look forward to that continuing here in Minnesota."

The trade also helps Minnesota from a financial perspective. Budinger is due to make $942,000 next season and could become a free agent after next season.

"It's part of the business," Budinger told KRIV-TV in Houston. "The Rockets want to do something and they have got to pay for it."

The modest salary gives the Wolves more salary cap room than a guaranteed three-year deal for a first-round draft pick, which could open up their options for other moves in free agency, which begins July 1, or through trades.

Information from The Associated Press was used in this report.