Contracts to buy previously owned homes rose to their highest level in more than two years in July, an industry group said on Wednesday, suggesting the housing market recovery was gaining traction.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in July, increased 2.4 percent to 101.7 - the highest level since April 2010 and shortly before the deadline for the home buyer tax credit.

Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to rise 1.0 percent after declining 1.4 percent in June.

The report was the latest to show momentum in housing market recovery, with gains in home construction and sales and prices.