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Contracts to buy previously owned homes unexpectedly rose in June after two straight monthly declines, but the housing market remains hobbled by a dearth of properties available for sale.

The National Association of Realtors said on Monday its Pending Home Sales Index, based on contracts signed last month, increased 0.9 per cent to a reading of 106.9. Economists polled by Reuters had forecast pending home sales unchanged in June.

Pending home contracts become sales after a month or two, and last month’s surprise rise suggested a rebound in existing home sales, which have declined for three straight months. But any bounce back in home sales is likely to limited by a chronic shortage of homes, which is keeping house prices elevated.

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Pending home sales fell 2.5 per cent in June from a year ago. Housing data has softened in recent months. Housing starts and building permits dropped to a nine-month low in June amid more expensive building materials and shortages of land and labour. New home sales tumbled to an eight-month low in June.

“The trends in many housing indicators have weakened lately and we think that the recent increase in rates is putting some downward pressure on activity in the housing market,” said Daniel Silver, an economist at JPMorgan in New York.

House price increases are above 5 per cent on an annual basis, far outpacing wage growth, which has been stuck below 3 per cent, despite a robust labour market. The 30-year mortgage rate is around 4.54 per cent, but still low by historical standards.

Though the weakness in housing has been mostly driven by supply constraints, there are worries that it could spill over to the broader economy, through a reduction in purchases of household items like appliances and furniture.

Investment in home building contracted in the second quarter. It was the second straight quarterly decline. The economy grew at a 4.1 per cent annualized rate in the April-June period, the strongest performance in nearly four years.

In June, home purchase contracts increased 1.1 per cent in the populous South. They gained 0.7 per cent in the West, which has seen faster house price inflation, and jumped 1.4 per cent in the Northeast. Contracts rose 0.5 per cent in the Midwest.

“Even with slightly more homeowners putting their home on the market, inventory is still subpar and not meeting demand,” said Lawrence Yun, the NAR’s chief economist. “As a result, affordability constraints are pricing out some would-be buyers and keeping overall sales activity below last year’s pace.”

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The Realtors group expects existing home sales to decrease 1.0 per cent this year, reversing 2017’s 1.1 per cent increase.

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