The number of contracts to buy previously owned homes rose more than forecast in November, a sign sales are recovering following a post-tax credit plunge.

The index of pending resales increased 3.5 percent after jumping a record 10 percent in October, the National Association of Realtors said today in Washington. The median forecast in a Bloomberg News survey called for a 0.8 percent rise in November, and the gain was the fourth in five months. The group’s data go back to 2001.

Home demand is stabilizing after sales collapsed to a record low in July, as the effects of a tax incentive worth as much as $8,000 waned. A jobless rate hovering near 10 percent means foreclosures will remain elevated and any recovery in housing, the industry that precipitated the worst recession since the 1930s, will take time to develop.

“We’re starting to see stability in pending sales,” Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, said before the report. “The fact that distressed sales are elevated does bolster the sales figures. The market won’t feel normal again” until foreclosures come down.

A report today from the Labor Department showed claims for jobless benefits fell last week to the lowest level since July 2008, showing the labor market is improving heading into 2011. Filings decreased by 34,000 to 388,000 in the week ended Dec. 25, fewer than the lowest estimate of economists surveyed.

Other figures showed the economy accelerated at the end of the year. The Institute for Supply Management-Chicago’s index of business activity jumped to 68.6 in December from 62.5 in the prior month. Readings greater than 50 signal expansion and the level was the highest since July 1988.

Economists’ Forecasts

The projected increase in pending home sales was based on the median of 24 forecasts in the Bloomberg survey. Estimates ranged from a drop of 5 percent to a gain of 5 percent.

Two of four regions saw an increase, today’s report showed, led by an 18 percent jump in the West. Pending sales rose 1.8 percent in the Northeast. They fell 4.2 percent in the Midwest and 1.8 percent in the South.

Compared with November 2009, pending sales in the U.S. were down 2.4 percent.

Even as the labor market is improving and manufacturing is growing, housing remains a weak link. NAR chief economist Lawrence Yun last week estimated there were about 4.5 million distressed properties that could potentially reach the market in coming months.

Home Prices

Average home prices as measured by the S&P/Case-Shiller indexes have begun dropping again after rising when the tax incentive was in effect. The group’s 20-city index fell 0.8 percent in October from a year earlier, the biggest year-on-year decline since December. It fell 1 percent from the prior month, and is down 30 percent from its July 2006 peak.

Reports earlier this month showed the housing market is stuck near recession levels. Housing permits fell in November to the third-lowest level on record, while starts rose for the first time in three months, the Commerce Department reported Dec. 16.

Sales of new and existing homes last month rose less than projected by the median forecast of economists surveyed by Bloomberg, reports from the Commerce Department and the National Association of Realtors showed last week. Existing home sales represent closings on the contracts captured by the pending sales gauge.

Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, on Dec. 22 reported a fourth-quarter loss bigger than analysts expected as revenue fell 19 percent.

“The year can generally be described as one where we and the industry were bouncing along the bottom,” Chief Executive Officer Ara Hovnanian said on a conference call.

Even so, economists in the past two weeks have boosted projections for fourth-quarter growth, reflecting a pickup in consumer spending and passage of an $858 billion bill extending all Bush-era tax cuts for two years.