Resales fell 1 percent to a 4.94 million annual rate last month, according to the median forecast of 77 economists surveyed by Bloomberg News. The 4.89 million pace reached in January and matched in April was the lowest since records began in 1999.

The biggest housing recession in a generation, now being exacerbated by a tightening in credit and rising borrowing costs as financial losses spread, threatens to stall economic growth. Mounting foreclosures are depressing home prices even more, prompting some buyers to hold out for bigger bargains.

"Falling home values, rising mortgage rates, tightening credit and stricter borrowing guidelines continue to keep potential home buyers out of the market," said Chris Low, chief economist at FTN Financial in New York.

Survey estimates ranged from a 4.79 million pace to 5.1 million. The National Association of Realtors' report is due in Washington at 10 a.m.

Sales sank below a 5 million pace for the first time in December and have held below that level in four of the first five months of this year. Purchases are down by about a third from a record of 7.25 million reached in September 2005.

Separately, the Labor Department today may report at 8:30 a.m. that initial claims for jobless benefits rose to 380,000 last week from 366,000 the prior week, according to economists surveyed by Bloomberg.

Foreclosures jump

More Americans are walking away from their homes as property values slump and borrowing costs on adjustable-rate mortgages reset higher. Bank seizures increased a record 171 percent in June from a year ago and foreclosure filings rose 53 percent, RealtyTrac Inc., a seller of default data, reported this month.

Home prices nationwide have fallen 18 percent on average from their July 2006 peak, according to the S&P/Case-Shiller index of 20 metropolitan areas. The drop in values may be giving those buyers still able to get financing reason to hesitate.

Consumer sentiment dropped in June to the lowest level in 28 years, according to the Reuters/University of Michigan survey, and the economy lost jobs for a sixth straight month, adding to reasons home buyers are sidelined.

Federal Reserve Chairman Ben S. Bernanke last week abandoned his June assessment that the threat of an economic downturn had diminished, telling lawmakers in semiannual testimony in Washington that there were ``significant downside risks'' to the economic outlook.

Bernanke's view

"In the housing sector, activity continues to weaken," he said. "The declines in home prices have contributed to the rising tide of foreclosures; by adding to the stock of vacant homes for sale, these foreclosures have, in turn, intensified the downward pressure on prices."

Concern over the ability of Fannie Mae and Freddie Mac, the largest U.S. purchasers of mortgages, to survive the meltdown in subprime lending has heightened the credit crisis and may further curtail access to loans. The Bush administration yesterday withdrew its threat to veto a rescue plan for Fannie and Freddie that included a measure to buy up foreclosed properties.

Washington Mutual Inc., the biggest U.S. savings and loan, said this week that mortgage-related losses through 2011 will be at the high end of its forecast as the housing crisis reaches borrowers with stronger credit.

There is "no sign of a recovery in housing" this year, Caterpillar Inc., the world's largest maker of earthmoving equipment, said in a statement this week. The company said second-quarter profit climbed 34 percent, exceeding analysts' estimates, on demand for backhoes and mining tools in China and the Middle East.

Caterpillar's Chief Executive Officer Jim Owens said he expects the U.S. economy, including the housing market, to begin recovering next year.

"We will get this problem behind us," Owens said in a July 22 interview with Bloomberg Television. "It will probably take another six months to a year, but it will come back."

Source: Bloomberg