WASHINGTON (Reuters) -Contracts to buy previously owned U.S. homes fell more than expected in July as higher mortgage rates and a slowing labor market sidelined prospective homeowners.

The National Association of Realtors said on Thursday pending home sales, based on signed contracts, slipped 0.4% last month. Economists polled by Reuters had forecast contracts, which become sales after a month or two, dipping 0.1%. Pending home sales rose 0.7% from a year earlier.

High mortgage rates have undercut the housing market. Though mortgage rates have eased from this year's lofty levels on expectations that the Federal Reserve would resume cutting interest rates in September, they remain elevated. A slowing labor market is also becoming a constraint for home sales. 

"Even with modest improvements in mortgage rates, housing affordability, and inventory, buyers still remain hesitant," said Lawrence Yun, the NAR's chief economist.