By Vincent Del Giudice and Bob Willis Oct. 1 (Bloomberg) -- The number of contracts to buy previously owned homes in the U.S. increased more than forecast in August, reinforcing signs of a rebound in housing, industry figures showed today. The index of signed purchase agreements, or pending home sales, rose 6.4 percent after a 3.2 percent gain in July, the National Association of Realtors announced in Washington. The gain was the seventh in a row. Compared with a year earlier, pending sales rose 12.4 percent. Declining home prices, low mortgages rates and government stimulus programs have helped end the housing-market meltdown that sparked the financial crisis. Federal Reserve policy makers last week committed to buy full amount of a $1.25 trillion mortgage-backed securities program and extended the end-date by three months. “We are in a recovery,” said Gary Thayer, macro strategist at Wells Fargo Advisors LLC in St. Louis, before today’s report. “There were a lot of people who were on the fence. Prices are firming up and people are getting back into the market.” Pending home sales were projected to increase 1 percent in August, according to the median forecast of 36 economists in a Bloomberg News survey. Estimates for August ranged from a drop of 2.5 percent to an increase of 3 percent. Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later. The Realtors group’s pending sales data go back to January 2001, and it started publishing the index in March 2005. Sales by Region By region, pending sales rose 16 percent in the West, 8 percent in the Northeast and 3 percent in the Midwest. They gained 0.8 percent in the South from the prior month. Home values in 20 metropolitan areas climbed in July by the most in almost four years, a private report showed this month. The S&P/Case-Shiller home-price index increased 1.2 percent in July from the prior month, the biggest gain since October 2005. From a year earlier, values were down 13.3 percent, the smallest decline in 17 months. Sales of existing homes fell in August for the first time since March, dropping by 2.7 percent from a month earlier to 5.1 million at an annual rate, according to a Sept. 24 from the National Association of Realtors. Tax Credit The Obama administration’s $8,000 tax credit for first-time buyers, which is due to expire at the end of November, combined with lower prices as foreclosures have mounted, have helped lift sales this year. At the same time, record foreclosures have drawn more buyers to existing homes and away from new homes. The interest rate on a fixed 30-year mortgage stayed at 5.04 percent last week, according to mortgage buyer Freddie Mac of McLean, Virginia. The rate was the lowest since May. Some builders are still struggling. Los Angeles-based KB Home, which that sells to first-time buyers, reported a third- quarter loss Sept. 25 and said a housing recovery isn’t imminent. “If where we are today represents a bottom, we are prepared to capture growth,” Chief Executive Officer Jeff Mezger said in a conference call with analysts and investors. “The precise timing of a housing recovery remains uncertain.” Sales of new homes climbed in August to the highest level in almost a year as builders cut prices at a record pace. Sales increased 0.7 percent to a 429,000 annual pace, according to a report last week from the Commerce Department. To contact the reporters on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net; Thomas R. Keene in New York tkeene@bloomberg.net.

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