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Jun 29, 10:47 AM EDT

Fewer people signed contracts to buy homes in May, first year-over-year drop in nearly 2 years

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AP Photo/Elise Amendola

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WASHINGTON (AP) -- Fewer Americans signed contracts to buy homes in May, with the year-over-year pace of pending sales sliding for the first time in nearly two years.

The National Association of Realtors said Wednesday that its seasonally adjusted pending home sales index fell 3.7 percent last month to 110.8, slightly below its May 2015 reading of 111. Overall home sales have steadily improved over the past year. But buyers are facing a shortage of available homes that might have curtailed pending sales last month.

Pending sales contracts are a barometer of future purchases. A sale is typically completed a month or two after a contract is signed. May's decline suggests that completed home sales could slow in July or August.

In May, completed sales of existing homes rose 1.8 percent to a seasonally adjusted annual rate of 5.53 million, the highest level since February 2007, the Realtors reported last week. But the number of listings sank 5.7 percent from a year ago, meaning that homebuyers have limited choices.

The tight inventory has caused homes to sell after fewer days on the market and pushed up prices.

Homes sold in May after an average of just 32 days on the market, the fastest pace ever measured by the Realtors since they began tracking the figure in 2011. Homes stayed on the market on average for 40 days a year ago. The median sales price was $239,700, a 4.7 percent increase over the past 12 months.

Rising prices and a limited supply of homes have likely constrained sales, which have been steadily improving from the depths of the housing bust.

Would-be homebuyers have been able to consider higher-priced homes because of mortgage rates near historic lows.

Mortgage purchaser Freddie Mac said the average 30-year fixed-rate mortgage last week was 3.56 percent, down from 4.02 percent a year ago.

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