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Pending home sales rise in July

A new home is being built next to a home with a for sale sign on a street in Vienna, on the morning the National Association of Realtors issues its Pending Home Sales for February report, in Virginia March 27, 2014. REUTERS/Larry Downing

WASHINGTON (Reuters) - Contracts to buy previously owned U.S. homes rose less than expected in July, but continued to suggest upward momentum in the housing market recovery.

The National Association of Realtors said on Thursday its

Pending Home Sales Index, based on contracts signed last month, increased 0.5 percent to 110.9.

Pending home contracts become sales after a month or two, and last month's increase suggested further gains in home resales, which reached an 8-1/2-year high in July. Economists had forecast pending home sales rising 1.0 percent last month.

Housing is gaining steam, driven by a tightening labor market. Pending home sales rose 7.4 percent from a year ago.

Contracts increased 4.0 percent in the Northeast and were unchanged in the Midwest. They rose 0.6 percent in the South, but fell 1.4 percent in the West.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)