NEW YORK -- More Americans signed contracts to buy previously owned homes in February, easing concern that the real estate market will get even worse.
The National Association of Realtors' index of signed purchase agreements rose 0.7 percent after dropping 4.2 percent in January. Economists had forecast a decline. The index was down 8.5 percent from a year earlier.
Lower borrowing costs and falling house prices are tempting some buyers back into the market, which is suffering its worst recession since 1991, economists said. Stocks extended gains after the report, which is consistent with predictions by the Federal Reserve that the slump in residential real estate will be contained.
"The chance of another outsized drop in housing is dissipating," said Michael Englund, chief economist at Action Economics LLC in Boulder, Colo. "There has been remarkably little pass-through to the rest of the economy."
The index of pending resales is considered a leading indicator in the housing market because it tracks contract signings. The Realtors' existing-home sales report tracks mainly closings, which typically occur a month or two later.
"Housing is groping for a bottom here," said Eric Green, chief market economist at Countrywide Securities in Calabasas, Calif. "Consumers are feeling better about getting into the market."
Economists anticipated that pending sales would drop 0.5 percent, from an originally reported 4.1 percent decline the prior month.
The gain in February "is encouraging," said David Lereah, chief economist for the real estate agents group. "The data suggests an underlying stabilization is taking place in the housing market, but it will take another month or two to clarify."
The report showed that pending resales rose in two of four regions. They increased 4.5 percent in the South and 2.9 percent in the Midwest. Sales dropped 6 percent in the West and 1.3 percent in the Northeast.
The rate on a 30-year fixed-rate mortgage has averaged 6.21 percent so far this year, compared with a four-year high of 6.80 percent in July, according to figures from Freddie Mac, the second-biggest American mortgage finance company.
The existing-home sales report is based on a sample of about 40 percent of transactions in the multiple-listing service used by real estate agents. The pending resales index covers about 20 percent of the transactions.
A separate report yesterday showed that retail sales gained 4.9 percent last week from a year earlier, the most in two months. Warmer weather spurred consumers to snap up clothing and holiday foods for Easter and Passover, according to the International Council of Shopping Centers and UBS Securities LLC.