May 4 (Bloomberg) -- The number of Americans signing contracts to buy previously owned homes jumped in March for the first back-to-back gain in almost a year, reinforcing signs that the housing slump in its fourth year may be near a bottom.

The 3.2 percent gain in the index of signed purchase agreements, or pending home resales, compared with a 2 percent increase in February, the National Association of Realtors said today in Washington. The March reading of 84.6 was 1.1 percent higher than the 83.7 level in the same month a year earlier.

Foreclosure-driven declines in values and lower mortgage rates are putting homes within reach for more Americans, potentially charting a path out of the housing recession that’s now in its fourth year. The report sent benchmark stock indexes to levels not seen since January and indicated that tax breaks for first-time buyers and efforts to thaw credit are paying off.

“Confidence has improved,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “People are worrying a bit less about a depression and starting to see signs of recovery, and that means you’re going to see more people jump into the market.”

Stocks rose after the housing report, with the Standard & Poor’s 500 Index climbing 2.1 percent to 895.78 at 10:49 a.m. in New York, the highest intraday level in four months. Treasuries fell for a fifth day, pushing the yield on benchmark 10-year notes up 2 basis points to 3.18 percent.

Leading Indicator

Economists forecast the index would be unchanged, according to the median of 32 projections in a Bloomberg News survey. Estimates ranged from a 2.3 percent drop to an increase of 3.5 percent.

Pending resales are considered a leading indicator because they track contract signings. NAR’s 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.

Separately, the Commerce Department said today that spending on U.S. construction projects unexpectedly rose in March for the first time in six months as increases in commercial and government projects overshadowed a continuing drop in home building. Private construction of single-family homes was down 52 percent from a year earlier, Commerce said.

Two of four regions saw an increase in pending resales, today’s report showed. Pending resales rose 8.5 percent in the South and 3.9 percent in the West, while falling 5.7 percent in the Northeast and 1 percent in the Midwest.

Some Stabilization

Other reports point to some stabilization in the housing market. The decline in home prices in 20 major U.S. cities slowed during February for the first time since 2007, the S&P/Case-Shiller index showed on April 28. Also, sales of previously owned homes in March held above a decade-low reached two months earlier, NAR, the realtors group, said April 23.

Government efforts to lower borrowing costs and unclog lending may be starting to pay off. The average rate on a 30- year fixed mortgage fell below 5 percent for the second time on record in the week ended March 19 and has held below that since, according to Freddie Mac. The rate reached a record low of 4.78 percent in the week ended April 2.

NAR’s affordability index, which tracks mortgage rates, home prices and incomes, surged in February to the highest level in 20 years of data.

Contraction ‘Slower’

The Federal Reserve last week refrained from increasing purchases of Treasuries and mortgage securities, indicating policy makers believe the worst of the recession has passed, while keeping the benchmark interest rate between zero and 0.25 percent. The Fed said the pace of economic contraction “appears to be somewhat slower.”

Even so, a weak job market is one reason economists say the housing market will be slow to rebound and foreclosures may keep rising. A total of 803,489 properties received a default or auction notice or were seized in the first quarter, the highest since records began four years ago, according to RealtyTrac Inc., an Irvine, California-based seller of mortgage data.

Distressed properties accounted for about 50 percent of all home resales in March, according to NAR, up from about 45 percent in previous months. First-time buyers accounted for about 51 percent of sales.

Lawrence Yun, chief economist at NAR, cautioned in a statement that while incentives and low prices are attracting new buyers, “we need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around.”

Builders are struggling as buyers flock to foreclosed properties at bargain prices.

Ryland Group Inc. last week reported a wider first-quarter loss. The company closed on 1,049 homes in the period, 32 percent less than a year earlier. New orders fell 38 percent to 1,347 and the inventory of unsold homes decreased 22 percent to 501 as of March 31.

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net.

Last Updated: May 4, 2009 10:54 EDT