Pending home sales off 3.2% in July

WASHINGTON - Fewer Americans signed contracts to purchase previously owned homes in July as harder-to-get financing kept would-be buyers from taking advantage of lower prices.

The index of pending home resales fell 3.2 percent after rising 5.8 percent in June, the National Association of Realtors said yesterday in Washington. Economists had projected a 1.5 percent decline, according to the median of 39 forecasts in a Bloomberg News survey. A separate report showed inventories at US wholesalers piled up twice as fast as forecast in July as their sales slid.

The housing figures help explain why the government took over Fannie Mae and Freddie Mac over the weekend. Policy makers are aiming to stem an increase in mortgage rates that was triggered in part by the turmoil that engulfed the two companies. Rates have dropped since Treasury Secretary Henry Paulson's intervention.

"The market is still showing a lot of fragility," said Jeffrey Roach, chief economist at Horizon Investments in Charlotte, N.C., who forecast the pending sales gauge would drop 3 percent. "The credit crunch is causing some of these borrowing costs to remain higher, and that's part of the reason people are hesitant to jump in."

The Commerce Department said that wholesale inventories rose 1.4 percent, led by higher stockpiles of automobiles, machinery and petroleum, after an increase of 0.9 percent in June. Sales dropped 0.3 percent, the most since February.

Pending resales are considered a leading indicator because they track contract signings. Closings are tallied in a separate report.

The pending figure was down 6.8 percent from July 2007, reflecting declines in every region except the West, the housing report showed.

Compared with June, resales dropped the most in the West, where they were down 10.6 percent. They fell 7.5 percent in the Northeast and were unchanged in the South. Pending sales increased 2.8 percent in the Midwest.

Thirty-year fixed-rate mortgages averaged 6.29 percent in July, up from an average of 5.81 percent in the first half of the year, according to Bankrate Inc. Rates fell to 5.88 percent yesterday.