FILE PHOTO: A home for sale is seen in Santa Monica, California, U.S. on March 21, 2017. REUTERS/Lucy Nicholson/File Photo

WASHINGTON (Reuters) - Contracts to buy previously owned homes fell in July, continuing a general trend in recent months that reflects a lack of supply in the market.

The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, decreased 0.7 percent to 106.2 in July. Economists polled by Reuters expected an increase of 0.3 percent.

Pending home contracts become sales after a month or two, and recent declines in the NAR index have reflected generally tight supply.

Contracts for existing homes fell 2.3 percent last month on an annualized basis, the seventh such monthly drop.

Lawrence Yun, the NAR’s chief economist, said the decline reflected both supply constraints and a strong job market that is bidding up prices.

“Multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it,” Yun said.