The consensus forecast is expecting Thursday's pending home sales index (PHSI) from the National Association of Realtors to fall by 1.0% in June, following a 4.7% decline in the May survey and an unexpected 7.1% rebound in April.

Prior to the advance in April - which economists say was likely related to purchases of foreclosed homes - the index had posted declines in five of the previous six months. In the past year from May 2007, the index has fallen 14.6% to a level of 84.7.

The all-time low in the seven-year index was reached in the March survey at 83.0.

The PHSI looks at home sales that have been signed but not finalized, a process that takes another month or two. The value of the index lies in its ability to forecast existing home sales, which represent eight-tenths of the market.

Following last month's report, NAR chief economist Lawrence Yun said the "overall decline in contract signings suggests we are not out of the woods by any means." He advocated the passing of the housing stimulus bill, which has since been passed. President Bush signed the legislation on Wednesday, July 30.

For the June report, the consensus from economists is for a 1.0% decline, but estimates range from a gain of 3.5% to a loss of 3.0%.

Patrick Newport, U.S. economist at Global Insight, said higher interest rates in June likely contributed to another month of declines in pending sales. He said the decrease should be between 1% and 2%, but it's hard to tell.

Jennifer Lee, senior economist at BMO Capital Markets, said mortgage rates haven't lowered alongside the Fed's slashing of interest rates, but on an historical basis rates are still low and changes in the past eight years have been within a narrow range.

On the housing bill, Newport said the legislation should have a positive effect in terms of preventing some foreclosures, but added "there's really nothing the government can do" about the fundamental problem in the housing market, which is that there are too many homes in the market.

At the current sales pace in June's existing home sales report, there were 11.1 months of inventory in the market.

"Prices must drop to bring equilibrium to the market," Newport added. "The more homes you keep out of foreclosure the better," but the government can't do much to prevent prices from falling, which is necessary to lower inventories, he said.

Lee also said the housing market won't see a turnaround until the overhang of supply has been reduced, which she said won't take place until late this year or early 2009.

By Patrick McGee and edited by Sarah Sussman