Jan. 8 (Bloomberg) -- The number of Americans signing contracts to buy previously owned homes fell more than forecast in November, signaling further deterioration in housing.

The National Association of Realtors' index of pending home sales decreased 2.6 percent to 87.6, following a 3.7 percent gain in October that was larger than previously estimated, the group said today in Washington.

The figures underscore Treasury Secretary Henry Paulson's forecast that the housing recession will continue, posing the biggest risk to economic expansion. Economists said more stringent lending practices following the collapse in subprime mortgages and prospects that home prices will keep falling are deterring buyers.

``There is no evidence it is bottoming,'' Paulson said today about the housing market. He added that a plan designed to stem a wave of foreclosures may need to be expanded beyond subprime homeowners.

Economists predicted the index of signed contracts for existing homes would fall 0.7 percent following a previously reported 0.6 percent October increase, according to the median of 33 projections in a Bloomberg News survey. Estimates ranged from a drop of 3 percent to a 0.3 percent increase.

Compared with a year earlier, the index was down 19 percent.

`Keep Dropping'

``We'll probably see more weakness in existing home sales given that inventories are so high,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``Prices may keep dropping for a while.''

U.S. consumer borrowing rose more than forecast in November as Americans used credit cards and auto loans to add to a record amount of debt, Federal Reserve figures showed separately today.

Consumer credit increased $15.4 billion for the month to $2.51 trillion, after rising $2 billion in October, the Fed said.

The housing slump is likely to last well into 2008, hurting economic growth and prompting Federal Reserve policy makers to lower interest rates, analysts said.

Stocks extended gains immediately after the report and later dropped, led by a slump in financial shares. The Standard & Poor's 500 index fell 1.8 percent to 1,390.19. Treasury securities advanced. The benchmark 10-year note yield declined to 3.78 percent, from 3.83 percent late yesterday.

Today's figures showed pending resales fell in three of four regions. Purchases decreased 13 percent in the Northeast, 4.1 percent in the Midwest and 2.1 percent in the West. Sales rose 2.3 percent in the South.

KB Home Loss

KB Home, the fifth-largest U.S. homebuilder, today reported a fourth-quarter loss as tumbling demand for new homes forced the company to write down land values. Los Angeles-based KB Home operates in 13 states, including California, Florida, Nevada and Arizona.

The bigger gain in October than previously estimated suggested the market may be stabilizing, according to Lawrence Yun, the NAR's chief economist.

``Although there could be some minor slippage in the first quarter, existing home sales should hold in a narrow range before trending up,'' Yun said in a statement. ``The exact timing and the strength of a home-sales recovery is a bit uncertain.''

`Take a While'

Paulson, speaking on CNBC television during a visit to New York, said evidence shows the housing decline ``has further to run.'' Bush told reporters separately that ``the housing market is soft, and it's going to take a while to work through the downturn.''

The Treasury chief indicated the outlook may prompt an expansion of the plan Bush administration officials brokered with mortgage lenders last month. The initiative was designed to make it easier to negotiate affordable loans and freeze some adjustable-rate mortgages at current rates.

``One thing we will consider is maybe expanding this beyond subprime borrowers to other borrowers,'' Paulson said.

There was a 10.3 months' supply of previously owned homes on the market in November at the current sales pace, compared with an average 6.5 months in 2006 and 4.5 months a year earlier.

Prices Fall

That excess is one reason property values are dropping. Home prices in 20 U.S. metropolitan areas fell in October by the most in at least six years, based on the S&P/Case-Shiller home- price index. The decrease, reported last month, was the biggest since the group started keeping year-over-year records in 2001.

The Realtors association estimates 5.7 million homes will be sold in 2008, little changed from an estimated 5.65 million last year. Purchases of new homes will fall to 669,000 from 773,000.

While traders anticipate the Fed will lower its benchmark rate at least a quarter point this month, Philadelphia Fed Bank President Charles Plosser said he hasn't made up his mind yet.

``A substantially weaker outlook than expected, particularly if that weakness is projected to be more prolonged than anticipated, may require further adjustments to policy,'' Plosser said in a speech in Gladwyne, Pennsylvania.

Boston Fed chief Eric Rosengren said in a speech today that ``The continued decline in residential investment has heightened the risk of a more significant downturn in the overall economy.''

Economists at Bank of America Corp. today said the Fed would lower the target rate more than they had previously forecast. The rate would drop to 3.5 percent by the end of April, a quarter point more than they had projected. The odds of a half-point reduction later this month now equal those of a quarter-point move, they said.

The real-estate agents' group began reporting pending home resales in March 2005 and has supplied historical data back to February 2001. The gauge is considered a leading indicator because it tracks contract signings. The group's existing-home purchases report tracks closings, which typically occur a month or two later.

To contact the reporter on this story: Joe Richter in Washington at Jrichter1@bloomberg.net

Last Updated: January 8, 2008 16:45 EST