WASHINGTON—Contracts to buy U.S. previously owned homes dropped to the lowest level in nearly two years in February, weighed down by a persistent shortage of properties, and activity could remain sluggish amid increasing mortgage rates and high house prices. The National Association of Realtors (NAR) said on Friday its Pending Home Sales Index, based on signed contracts, fell 4.1 percent last month to 104.9, the lowest level since May 2020. It was the fourth straight monthly decline in the index, which leads sales by a month or two. Pending home sales declined in the South, Midwest, and West, but rose in the Northeast. Economists polled by Reuters had forecast contracts rebounding 1.0 percent. Pending home sales decreased 5.4 percent in February on a year-on-year basis. “A lack of supply that is showing few signs of easing is boosting prices and impacting affordability,” said Rubeela Farooqi, chief U.S. economist at High Frequency …