The legendary Red Devils defender admits that he is pleasantly surprised to see his old club rise to third in the Premier League table but feels they are in a "bizarre" position due to the unpredictable nature of the campaign so far.
Neville said: "You just watch them and think there isn't a team emerging there who can challenge for the title. My gut feeling is to still say I don't think Manchester United are going to win the league.
"But I am surprised, it's bizarre where they are considering a couple of weeks ago you were thinking this could be difficult, a challenging period coming into Christmas, but it's looking a little bit rosier."
The Sky Sports pundit admits United's position is strange considering the inconsistent nature of their performances and the pressure that has been placed on manager Ole Gunnar Solskjaer's position.
He added: "For Manchester United it was about closing the gap, no one ever thought they would be in a position to go so close.
"They're going to go second in the league if they can close that gap. It doesn't feel like Manchester United have played like that.
"There has been talk of the manager's job, going out of Europe was a big problem, the performances at times have been horrible."
Neville adds that United would have "snapped your hand off" to be just a handful of points behind leaders Liverpool.
He said: "When you look at where they are in the league, and they can go two points behind Liverpool, if you'd said at the start of the season they'd be in a position to do that, coming into Christmas, you'd have snapped everyone's hands off.”