The number of contracts to purchase previously owned U.S. homes 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% after a revised 2.8% drop the previous month, according to figures the National Association of Realtors released Thursday. A 1% decline was projected for July, according to the median forecast in a Bloomberg News survey of economists.
Home sales had plunged after the expiration of 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," said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. "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% to an increase of 4%.
A report issued earlier Thursday said that 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 that 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, Thursday's report showed, led by a 12% jump in the West and a 6.3% rise in the Northeast. Compared with July 2009, nationwide pending sales were down 20%.
Unemployment close to 10% and lackluster job creation are making Americans guarded about large purchases such as homes.
To help homeowners who have 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.
Sales of previously owned homes, which account for about 90% of the housing market, fell 27% in July, the Realtor group said Aug. 24.
The average rate on a 30-year fixed mortgage dropped to a record-low 4.32% in the week that ended Thursday, the mortgage buyer Freddie Mac said in an e-mailed statement.
Lawrence Yun, the Realtor group's chief economist, said in a press release Thursday: "Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery. 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.
Foreclosures and short sales are another reason the housing market continues to restrain the economy.