WASHINGTON, June 28 (Reuters) - Contracts to buy previously owned U.S. homes unexpectedly fell in May, the third straight monthly decline, as a lack of homes for sale on the market crimped supply.
The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, dropped 0.8 percent to 108.5. Pending home sales fell in the Northeast, South and West, and were flat in the Midwest.
Economists polled by Reuters had forecast pending home sales increasing 0.8 percent in May. Pending home sales were down 1.7 percent from a year ago.
"A much higher share of homeowners compared to a year ago think now is a good time to sell, but until they do, sales will likely stay flat and low inventory will keep price growth moving swiftly," NAR chief economist Lawrence Yun said in a statement.
Housing demand is being driven by a strong economy and tight labor market. The unemployment rate fell in May to a 16-year low of 4.3 percent.
A lack of inventory has pushed up prices, particularly for more expensive homes. Home prices increased 26 percent for properties priced between $750,000 and $1 million compared to the same month last year.
Pending home sales contracts become sales after a month or two. Last month's fall suggests that home resales, which rebounded last month to the third highest monthly level in a decade, may also falter in the coming months. (Reporting by Lindsay Dunsmuir; Editing by Paul Simao)