July 1 (Bloomberg) -- The number of Americans signing contracts to buy previously owned homes rose for a fourth consecutive month in May, a sign the four-year slump in housing sales may be bottoming out.

The 0.1 percent gain in the index of signed purchase agreements, or pending home resales, followed a 7.1 percent rise the prior month that was bigger than previously estimated, the National Association of Realtors said today in Washington. The May reading was up 4.6 percent from the same month a year earlier.

Collapsing home prices, historically low mortgage rates and tax incentives are making housing more affordable for Americans, helping to stabilize sales that have fallen since September 2005. Still, with unemployment forecast to reach 10 percent this year, home purchases may languish at low levels for months before a recovery emerges.

“We’re starting to see sales stabilizing,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report. “We’ve probably reached bottom or are close to that.”

Economists forecast the index would remain unchanged in May after a previously reported 6.7 percent gain the prior month, according to the median of 36 projections in a Bloomberg News survey. Estimates ranged from a 3 percent drop to an increase of 7 percent.

Pending resales are considered a leading indicator because they track contract signings. The National Association of Realtors’ 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.

Northeast, West

Two of four regions saw an increase in pending sales, today’s report showed, led by a 3.1 percent month-on-month rise in the Northeast and a 2.2 percent gain in the West. Pending resales fell 1.7 percent in the South and 1.3 percent in the Midwest.

The agents’ association reported last week that home resales increased 2.4 percent in May, a second consecutive gain that reinforced the case that the slump in home sales may level out this year. The median price dropped 17 percent from a year earlier, the third-biggest decline on record.

Rising foreclosures have pulled down median home prices by nearly a third from their peak in mid-2006, boosting demand. Foreclosure filings, including default and auction notices as well as property seizures, climbed 18 percent in May from a year earlier, according to Irvine, California-based RealtyTrac Inc. Distressed sales accounted for about 33 percent of existing homes sold in May, according to the agents’ association on June 23.

Fed’s Efforts

Federal Reserve purchases of Treasuries and mortgage securities also brought mortgage rates down to 4.78 percent in early April, the lowest since records began in 1971. They have since risen to 5.42 percent in the week ended June 25, still low levels by historic standards, according to Freddie Mac, the biggest buyer of mortgage securities.

In addition, the Obama administration’s economic stimulus plan provided an $8,000 tax credit for first-time home buyers for purchases completed before Dec. 1.

Still, tight credit and job losses exceeding 6 million since the recession began in December 2007 have turned most Americans cautious about making big-ticket purchases.

Homebuilders see little relief in sight. Sales of new homes will remain little changed in coming months because of low consumer confidence and the difficulty would-be buyers have getting loans, Pulte Homes Inc. Chief Executive Officer Richard Dugas said at an investor conference June 23.

“Buyers are unwilling and unable to take on new mortgages,” Dugas said at conference in Boston. “Despite the record fall in prices and the tremendous deal that consumers get relative to the 30-year mortgage rates where they are today, we’re still having difficulty convincing people to get into the market.”

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.

Last Updated: July 1, 2009 10:00 EDT