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A U.S. flag decorates a for-sale sign at a home in the Capitol Hill neighborhood of Washington, in this August 21, 2012 file photo.JONATHAN ERNST/Reuters

Contracts to buy previously owned U.S. homes unexpectedly fell in December after three months of gains, an industry group said on Monday, but the housing market recovery remains intact.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, dropped 4.3 per cent to 101.7.

Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to rise 0.3 per cent after a previously reported 1.7 per cent increase in November.

The drop in contracts, which the Realtors group blamed on the tightening stock of homes, suggested resales could fall again in January after slipping in December.

"The supply limitation appears to be the main factor holding back contract signings in the past month," said NAR chief economist Lawrence Yun. "Supplies of homes costing less than $100,000 are tight in much of the country, so first-time buyers have fewer options."

Still, the housing market remains the economy's bright spot, and is expected to support growth this year. Pending home sales were up 6.9 per cent in the 12 months through December.

The NAR expects sales of previously owned homes to increase 9 per cent this year after a similar gain in 2012.

Home resale contracts were down in three of the country's four regions last month. They increased in the Midwest.

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