by 2 minutes A for sale sign sits outside a house in Miami Beach, according to a file photo. 22nd of October, 2009. Carlos Barria/Reuters (Corrects headline and first paragraph to make it clear that this was the highest May reading since 2005.) (Source: Reuters) Contracts to buy previously owned homes in the United States increased sharply in May, reaching their highest level since 2005. The Pending Home Sales Index, based on contracts signed last month, jumped 8.0 percent to 114.7, according to the National Association of Realtors (NAR). Pending home sales were expected to fall by 0.8 percent percent, according to economists polled by Reuters. Because pending home contracts turn into sales one to two months later, they are considered a forward-looking sign of the housing market’s health. In comparison to a year ago, pending sales were up 13.1%. Due to a scarcity of homes on the market, new and existing home sales have dropped dramatically this year. According to a separate survey released on Tuesday, the S&P/Case Shiller composite index of 20 metropolitan regions increased 14.9 percent year over year in April, the highest increase in over 15 years. (The headline and first paragraph of this item have been updated to reflect that the May reading was the highest since 2005.) Evan Sully contributed reporting, and Paul Simao edited the piece./nRead More