The number of contracts to purchase previously owned homes in the U.S. probably increased in August for a second month, a sign the housing market is stabilizing. The National Association of Realtors’ index of pending home resales rose 2.8 percent in August after a 5.2 percent gain the prior month, according to the median forecast of 30 economists surveyed by Bloomberg News. A separate report may show a transportation equipment-led decline in factory orders. Home sales have steadied after plunging in the months following the expiration of a housing tax credit. Unemployment projected to stay above 9 percent through 2011 may depress demand in coming months even as record-low mortgage rates and lower prices make homes more affordable. “We’re going to see the housing market continue to languish over the next several months and bounce along this bottom,” said Russell Price, a senior economist at Ameriprise Financial Inc. in New York. “There will be a stagnant environment until the economy recovers and people’s credit profiles” and the labor market improve, he said. The National Association of Realtors is scheduled to release its report at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 2 percent to an increase of 5.6 percent. Factory Orders A report from the Commerce Department at 10 a.m. is projected to show factory orders fell 0.4 percent in August, following a 0.1 percent increase a month earlier. Commerce Department figures on Sept. 24 showed bookings for durable goods other than transportation increased, including a pickup in orders for business equipment. The data may signal that manufacturing, which led the U.S. out of the worst recession since the 1930s, is holding up as companies replace outdated machines. Consumer spending is lagging behind as the jobless rate stays close to 10 percent. After averaging 9.3 percent in 2009, the unemployment rate will average 9.6 percent this year and 9.2 percent in 2011, according to the median forecast of economists surveyed by Bloomberg last month. The last time unemployment exceeded 9 percent for three consecutive years was 1939 to 1941. Joblessness limits home sales and increases the likelihood foreclosures will keep rising. Home seizures reached a record in August for the third time in five months, RealtyTrac Inc. said Sept. 16. Federal Reserve The labor market is also a reason why Federal Reserve policy makers may respond with more stimulus. The outlook for job growth and inflation is “unacceptable” and more monetary easing is probably needed to spur growth and avert deflation, Fed Bank of New York President William Dudley said in a speech Oct. 1. “Further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too longer,” Dudley said to a Society of American Business Editors and Writers conference. Lowering long-term interest rates by restarting purchases of Treasuries or mortgage debt would have a “significant” effect on the economy by supporting the value of homes and stocks, making housing and refinancing mortgages more affordable and reducing the cost of capital for businesses, he said. The economy is a top issue for voters in the November congressional elections, and polls show the public is increasingly skeptical of President Barack Obama’s performance. Home Sales Pending home sales are considered a leading indicator because they track contract signings. Existing home sales are tabulated when a contract closes, which typically occurs a month or two later. Sales of previously owned homes, which account for about 90 percent of the housing market, rose to a 4.13 million rate in August, the Realtors’ group said Sept. 23. The pace of sales was the second-lowest in a decade of record-keeping. Demand will probably be “soft” again in September and October, NAR’s chief economist Lawrence Yun told reporters at a press conference Sept. 23. The government’s homebuyer tax credit of up to $8,000 required contracts be signed on April 30 and closed by Sept. 30. Many of the closings occurred in May and June because the original incentive called for closings to occur by June 30. The weakness in housing helps explain why builder shares have declined this year. The Standard & Poor’s Supercomposite Homebuilding index has dropped 25 percent since reaching a 19- month high May 3. KB Home Orders at KB Home, a California builder focused on first- time buyers, fell 39 percent after the deadline for signing a contract to qualify for the federal tax credit expired. Unemployment and foreclosures make it difficult to forecast future sales, Jeffrey Mezger, the company’s chief executive officer, said Sept. 24. “The housing market continues to face significant headwinds from high unemployment and foreclosures, which are impeding a broader recovery, and recent net order trends in the homebuilding industry have injected additional caution into our near-term outlook,” Mezger said in a statement.

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