By Courtney Schlisserman Aug. 4 (Bloomberg) -- The number of Americans signing contracts to buy previously owned homes probably rose in June for a fifth month as lower prices and mortgage rates attracted buyers, economists said before a report today. The projected 0.7 percent gain would follow a 0.1 percent increase in May, according to the median estimate of 33 economists in a Bloomberg News survey. A report from the Commerce Department may show personal incomes fell 1 percent in June, the biggest drop since August 2005. Foreclosure-driven declines in home values are putting houses within reach of first-time buyers, helping to stabilize the slumping real-estate market which has been the biggest drag on economic growth. At the same time, with mortgage rates no longer dropping and unemployment still rising, it may be months before a sustained recovery in housing takes hold. “We’re starting to see tentative signs of stabilization in housing,” said Anika Khan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Rates are still low and prices are low. Even though lending standards are still somewhat tight, we are able to see some folks enter the market and get steals.” The report from the National Association of Realtors is due at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from a 1.2 percent drop to a 3 percent gain. Pending resales are considered a leading indicator because they track contract signings. NAR’s existing-home sales report tallies closings, which typically occur a month or two later. The group, whose pending data goes back to January 2001, started publishing the index in March 2005. Spending, Incomes The report from Commerce today may show consumer spending rose 0.3 percent in June before adjusting for inflation, according to the Bloomberg survey. For the second quarter, purchases dropped at a 1.2 percent annual pace after taking into account changes in prices, Commerce reported last week. Incomes are forecast to fall after jumping in May by the most in a year as tax cuts and the Obama administration’s stimulus package pushed the U.S. savings rate to a 15-year high. Homebuilder stocks have climbed over the last month amid evidence that demand is settling at low levels or picking up. The Standard & Poor’s Supercomposite Homebuilding Index rose 22 percent in July and closed yesterday at 261.28, the highest level since May 4. The agents’ association said July 23 that home resales in June rose for a third straight month, supporting the case that the industry’s downturn, now in its fourth year, will end in 2009. The median price dropped 15 percent from a year earlier. Sales of new homes soared 11 percent in June, the most since 2000, according to Commerce data released July 27. Affordability Index The Realtors’ group’s affordability index, which takes into account home values, household incomes and mortgage rates, reached a record high of 178.8 in April. The index was at 159.2 in June. Readings greater than 100 indicate a family earning the median income can afford a median-priced home at current borrowing costs. M.D.C. Holdings Inc., the Denver-based builder of Richmond America Homes, said July 31 that its orders had increased on a quarterly basis for the first time in four years. “Building and sales activity for the industry overall improved from historic lows recorded earlier this year,” M.D.C. Chief Executive Officer Larry Mizel said in a statement. While mortgage rates have crept higher as the economy improves, they are still below year-earlier levels and near record lows. The average rate on a 30-year fixed mortgage was 5.25 percent in the week ended July 30, according to Freddie Mac, compared with 6.52 percent in the same week a year earlier. Rates reached an all-time low of 4.78 percent in late April. Labor Market A weak labor market is one reason economists say a rebound in housing will be slow to develop. The unemployment rate, which reached a 25-year high of 9.5 percent in June, may exceed 10 percent by early 2010, according to the median forecast of economists surveyed by Bloomberg last month. The Labor Department is scheduled to release July payrolls data on Aug. 7. Rising defaults and foreclosures may depress property values for months, making buying a home risky even as such purchases become more affordable and perpetuating a difficult climate for homebuilders. Foreclosure filings reached a record 1.5 million in the first half of the year, according to data from RealtyTrac Inc., an Irvine, California-based seller of default data. Ryland Group Inc., a California homebuilder that focuses on first-time buyers, reported a second-quarter loss on July 30 that was greater than analysts estimated. New orders fell 16 percent to 1,716 in the period, the company said.

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