Contracts to purchase previously owned U.S. homes unexpectedly fell in February, suggesting a loss of momentum in the housing market after recent signs of improvement.

The National Association of Realtors said on Monday its Pending Home Sales Index, based on contracts signed in February, slipped 0.5 percent to 96.5. Signed contracts become sales after a month or two.

The report was the latest in a series to suggest a pause in the tentative housing market recovery in February and a weak start to the spring selling season.

However, given that contracts were up 1.5 percent between January and February, there is a chance that home resales could rise in March, economists said.

The actual existing home sales numbers still need to rise a bit in order fully to catch up, but the overall impression is one of a pause, said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

Economists polled by Reuters had expected pending home sales to advance 1.0 percent in February after rising 2.0 percent the prior month. Contracts signed were up 9.2 percent in the 12 months to February.

U.S. financial markets were little moved by the data, with investors taking their cue from Federal Reserve Chairman Ben Bernanke's cautious comments on the jobs market, which implied the U.S. central bank's monetary policy stance will remain accommodative for a while.

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Graphic - U.S. pending home sales:

http://link.reuters.com/baq37s

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DIMINISHED WEATHER LIFT

Data last week showed sales of previously owned homes fell in February, but remained the second highest since May 2010. Other reports last week also showed declines in home building activity and new home sales in February.

However, permits to build homes approached a near 3-1/2 year high in February, and both prices of new and previously owned homes rose from a year ago. Some economists attributed the retrenchment in sales last month the fading boost from the unseasonably mild winter weather.

We are seeing a diminishing lift from the weather. Even if you look at the February setback in most of these indicators, the direction is clearly still upwards, said Michael Englund, chief economist at Action economics in Boulder, Colorado.

We continue to think we hit the bottom in the housing sector about the middle of last year and that we are recovering, though it is a slow recovery and prices are not going to recover until next year.

The housing market continues to be hobbled by an oversupply of unsold homes, particularly foreclosures, which are depressing prices. Stringent conditions to qualify for a home loan are also an obstacle.

About a third of contracts are canceled every month, according to the NAR.

Indeed, February has been a bit of a pothole for the housing market. But with affordability high and job creation improving, there is still much opportunity for improvement in the housing sector, said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

Contracts fell in three of the four regions last month, but jumped 6.5 percent in the Midwest.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

Ben Bernanke