WASHINGTON (AP) -- The number of Americans 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 said Monday that its index of sales agreements fell 1.3 percent 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 that 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 cancelled 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, said the high number of cancellations suggest "heightened uncertainty on the part of purchasers and tighter credit standards in mortgage finance."Home loans are harder to come by. Many lenders are requiring 20 percent down payments and strong FICO credit scores to qualify.Signings are still roughly 18 percent above the June 2010 reading of 75.9, the lowest figure since the housing market went bust more than four years ago.Even though pending home sales rose in two of the past three months, that hasn't translated into increased sales.The pace of sales for previously occupied homes is trailing last year's 4.91 million sold, the fewest since 1997. In a healthy economy, people buy roughly 6 million homes each year.Sales of new homes fell in July for third straight month. This year is shaping up to be the worst for sales of new homes on records dating back to 1963.Homes are the most affordable they've been in decades. But bargain prices and super-low mortgage rates have done little to boost sales. Economists say it could be years before the nation's housing market recovers.The number of people signing home contracts rose in both May and June. But those increases did not make up for a huge drop-off in April, when signings fell more than 11 percent.Contract signings fell across most of the country. July's index fell 0.8 percent in the Midwest, 2 percent in the Northeast and 4.8 percent in the South. It rose 3.6 percent in the West.Home prices have risen for two straight months, according to the Standard & Poor's/Case-Shiller home-price index. A flurry of spring buyers has boosted sales. After adjusting for seasonal factors, such as spring buying, prices fell in 11 of 20 metro areas tracked by the index.A report on June's home prices will be released Tuesday.Another reason prices are stabilizing is because millions of foreclosures are in limbo. Many have been delayed until the government completes an investigation into improper practices by mortgage lenders. Once that probe is finished, banks will start seizing homes again and prices will likely fall again.Analysts say the weakening job market and the uncertainty over foreclosures could lead to deeper price declines in the second half of the year. They estimate prices will fall another 5 to 10 percent by year's end.