WASHINGTON (Reuters) -Contracts to buy previously owned U.S. homes increased more than expected in May, but higher mortgage rates remain a constraint for buyers.

The National Association of Realtors said on Thursday its Pending Home Sales Index, based on signed contracts, increased 1.8% to 72.6 last month. Sales rose in all four regions. Economists polled by Reuters had forecast contracts, which become sales after a month or two, would edge up 0.1%. 

Pending home sales advanced 1.1% from a year earlier.

"Consistent job gains and rising wages are modestly helping the housing market, said Lawrence Yun, the NAR's chief economist. "However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains."