By Courtney Schlisserman Sept. 2 (Bloomberg) -- The number of contracts to purchase U.S. previously owned houses unexpectedly rose in July, a sign the market may be starting to stabilize after the expiration of the homebuyer tax credit. The index of pending home resales rose 5.2 percent after a revised 2.8 percent drop the prior month, figures from the National Association of Realtors showed today in Washington. A 1 percent decline was projected for July, according to the median forecast in a Bloomberg News survey of economists. Home sales had plunged following a government tax credit of up to $8,000 that required contracts be signed by April 30. While mortgage rates at record lows are helping to make homes more affordable, further gains depend on the economy creating jobs. “We are at the bottom of the cycle,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “It’s going to be a modest recovery, certainly aided by the slowly recovering economy.” The gain in pending sales was the first in three months. Estimates in the Bloomberg survey of 37 economists ranged from a drop of 5 percent to an increase of 4 percent, after a previously estimated 2.6 percent decline in June. An earlier report showed the number of Americans seeking jobless benefits fell last week to a level that indicates the labor market has not improved this year. Initial jobless claims dropped by 6,000 to 472,000 in the week ended Aug. 28, the Labor Department said. Applications exceeded the 463,000 average so far this year. Pending home sales rose in all four regions in July, today’s report showed, led by a 12 percent jump in the West and a 6.3 percent rise in the Northeast. Versus Last Year Compared with July 2009, nationwide pending sales were down 20 percent. Unemployment close to 10 percent and a lack of faster job creation are making Americans guarded about large purchases such as homes. Economists forecast the Labor Department will report tomorrow that the U.S. lost 100,000 jobs in August and the unemployment rate rose to 9.6 percent. To help homeowners who’ve lost income avoid foreclosure, the Obama administration plans to offer $1 billion in zero- interest loans as part of $3 billion in additional aid targeting economically distressed areas. Minutes of the Federal Reserve’s Aug. 10 meeting, released this week, showed that while housing probably “had bottomed out,” more foreclosures would increase the number of homes for sale and damp construction. “A sustained upturn from very low levels was not imminent,” the central bankers said. Home Sales Sales of previously owned homes, which account for about 90 percent of the housing market, fell 27 percent in July, the Realtors’ group said Aug. 24. The average rate on a 30-year fixed mortgage dropped to a record-low 4.36 percent in the week ended Aug. 26, according to Freddie Mac. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” Lawrence Yun, the Realtors group’s chief economist, said in a statement. “But the recovery looks to be a long process.” New-home purchases, which make up the rest of the market and are tabulated when a contract is signed, declined to a record low in July, Commerce Department figures showed last week. Pending home sales are considered a leading indicator because they too track contract signings. Deals are typically closed on a month or two later. Homes Seized Foreclosures and short-sales are another reason the housing market continues to restrain the economy. Home seizures increased almost 4 percent in July from the previous month, with 325,229 properties getting a notice of default, auction or bank repossession, RealtyTrac Inc. said Aug. 12. Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its first quarterly profit since 2007 after a tax benefit and drop in writedowns. The acceleration in deposits and traffic through the first few weeks of May was not sustained the rest of the quarter that ended July 31, Horsham, Pennsylvania- based Toll said. Demand “has continued to be very bumpy and relatively slow,” Chief Executive Officer Douglas Yearley said on a conference call with analysts and investors on Aug. 25. “We don’t blame our buyers, they’re skittish.” To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

Source