Sales of previously owned U.S. homes tumbled to a record low in January, reversing the prior month's gains, according to a report on Tuesday that indicated the economy's downward spiral was gathering speed.

The data came as Federal Reserve Chairman Ben Bernanke urged bold action to pull the economy out of a 14-month slump and White House economic advisor Christina Romer warned that first-quarter output was looking pretty lousy.

The lengthening recession is keeping potential home buyers on the sidelines, despite housing affordability being at its most favorable in nearly four decades.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in January, plunged 7.7 percent to 80.4, the lowest since the NAR started tracking the series in 2001. The index was at 87.1 in December.

Compared with the same period a year earlier, pending home sales were down 6.4 percent in January.

U.S. stocks pared gains on the poor data and Federal Reserve Chairman Ben Bernanke's remarks. Treasury debt prices, which often rally on data highlighting the distress in the economy, were weighed down by Bernanke's comments as they appeared to support a jump in government debt issuance.

This (home sales decline) is at the heart of the idea that the economy is taking a second leg downward, said Cary Leahey, an economist at Decision Economics in New York.

President Barack Obama, whose administration has stepped in with a $787 billion stimulus package, said he saw little hope of near-term improvement in the economy, which shrank at a 6.2 percent annual rate in the fourth quarter.

HOME SALES DEPRESSED

Escalating job losses and weak consumer confidence are keeping house sales depressed, but there is cautious optimism that aggressive measures by the government and the Fed will help to stabilize the housing market, with the fortunes of the broader economy resting on it.

The Fed has cut its target for overnight interbank borrowing costs to a range of zero to 0.25 percent and is buying securities and making loans, steps that have pushed some mortgage rates lower.

Separately, the government has put in place a $275 billion program to stem a wave of home foreclosures.

The NAR's housing affordability index surged 13.6 percentage points in January to 166.8, the highest since tracking began in 1970.

The affordability index indicates a median-income family, earning $59,800, could afford a home costing $283,400 in January with a 20 percent down payment, according to the NAR.

Fundamentally, demand for housing is still very weak, but there is some price discovery going on. The data definitely supports the view that home sales will remain depressed over the next few months, said Michelle Meyer, an economist at Barclays Capital in New York.

There are still questions out there on when we will start to see the impact of the government's housing plan.

Last week, the NAR reported existing home sales fell 5.3 percent in January, while government data showed new home sales slumped to record lows, with prices dropping to their weakest level in five months.

Falling home prices, rising unemployment and job insecurity continue to impact consumer spending, which accounts for about two-thirds of U.S. economic activity.

Separately, Redbook Research said U.S. chain store sales fell 1.9 percent in the week ended February 28, compared with the same period a year ago. However, overall sales for February rose 0.8 percent compared with January.

The International Council of Shopping Centers reported sales down 0.6 percent last week.

Data later on Tuesday is expected to show U.S. auto sales probably hovered around 27-year lows in February.

(Additional reporting by Emily Kaiser and Jeff Mason in Washington; Editing by Dan Grebler)

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