Aug 30 (Reuters) - Contracts to purchase previously owned U.S. homes declined for the second consecutive month in July in step with limited supply that’s been unable to keep up with demand from potential homebuyers. The National Association of Realtors (NAR) said on Monday its Pending Home Sales Index, based on contracts signed last month, fell 1.8% after dropping a revised 2.0% in June. Economists polled by Reuters had forecast pending home sales would increase 0.4%. Pending home contracts are seen as a forward-looking indicator of the health of the housing market because they become sales one to two months later. (Reporting by Evan Sully; Editing by Andrea Ricci) Our Standards: The Thomson Reuters Trust Principles.