WASHINGTON, May 31 (Reuters) - Contracts to buy previously owned U.S. homes fell for a second straight month in April amid a supply squeeze, but the housing market recovery remains supported by a strong labor market.
The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, dropped 1.3 percent to 109.8.
Economists had forecast pending home sales rising 0.5 percent last month. Pending home sales fell 3.3 percent from a year ago. That is the first year-on-year drop since last December and the largest since June 2014.
“Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market,” said NAR chief economist Lawrence Yun. “Realtors are indicating that foot traffic is higher than a year ago.”
Pending home contracts become sales after a month or two, and last month’s fall suggested a further decline in home resales after they dropped 2.3 percent in April.
Demand for housing is being driven by a tight labor market, marked by a 4.4 percent unemployment rate, which is generating wage increases and boosting employment opportunities for young Americans.
Sales activity, however, remains constrained by tight inventories, which are driving up home prices. Housing inventory has dropped for 23 straight months on a year-on-year basis.
Pending home sales fell in the Northeast, Midwest and South last month, but surged 5.8 percent in the West. (Reporting By Lucia Mutikani; Editing by Andrea Ricci)