Contracts to buy U.S. homes fell 1.3% in July

The number of people who signed contracts to buy homes fell in July, further evidence that the depressed housing market remains a drag on the economy. The National Association of Realtors says its index of sales agreements fell 1.3% in July to a reading of 89.7. A reading of 100 is considered healthy by economists. The last time the index reached that level was in April 2010, the final month in which buyers could qualify for a federal tax credit. Contract signings are usually a reliable indicator of where the housing market is headed. There’s typically a one- to two-month lag between a sales contract and a completed deal. But the Realtors group says a growing number of buyers have canceled contracts after appraisals showed the homes were worth less than they bid. A sale isn’t final until a mortgage is closed. Michael Gapen, director of U.S. economic research at Barclays Capital Research, says the high number of cancellations suggest “heightened uncertainty on the part of purchasers and tighter credit standards in mortgage finance.” Signings are still roughly 18% above the June 2010 reading of 75.9, the lowest figure since the housing market went bust more than four years ago.