By Lucia Mutikani
WASHINGTON (Reuters) - Contracts to buy previously owned U.S. homes rose to their highest level in just over nine years in May, in a further boost to the housing market and the broader economic outlook.
The National Association of Realtors said on Monday its Pending Home Sales Index, based on contracts signed last month, increased 0.9 percent to 112.6, the highest level since April
2006. Contracts have now increased for five straight months.
Pending home contracts become sales after a month or two, and last month's increase pointed to further gains in home resales after they hit a 5-1/2-year high in May. Economists had forecast pending home sales rising 1.2 percent last month.
"The recent trend suggests that we will see continued strength in resales in the months ahead. However the current low inventory levels, which are placing upward pressure on home prices, remain a downside risk," said Derek Lindsey, an analyst at BNP Paribas in New York.
The housing market recovery is back on track after being slammed by bad weather at the start of the year. It is being bolstered by a tightening labor market, which is helping to spur some pick-up in wage growth.
U.S. financial markets were little moved by the report, with investors warily watching developments in Greece as Athens moved closer to a defaulting on its debt. U.S. stocks fell at the open, while the dollar was little changed against a basket of currencies. Prices for U.S. government debt were higher.
The pending home sales report added to robust building permits, housing starts, new home sales and home resales data in painting a bullish picture of the housing market.
It also joined strong retail sales, consumer sentiment and employment data in suggesting a building up of momentum in the economy after a mild contraction in output in the first quarter.
Pending home sales increased 10.4 percent from a year ago.
Contracts increased 6.3 percent in the Northeast and rose 2.2 percent in the West. They slipped 0.8 percent in the South and dipped 0.6 percent in the Midwest.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)