WASHINGTON (Reuters) - Contracts to buy previously owned U.S. homes rose in November to their highest level in 2-1/2 years, an industry group said on Friday, further evidence of a strengthening housing market recovery.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, increased 1.7 percent to 106.4 - the highest level since April 2010 when the home-buyer tax credit expired.

Economists polled by Reuters had expected signed contracts, which become sales after a month or two, to rise 1.0 percent after a revised 5.0 percent increase in October. It was the third straight month of gains.

"Home sales are recovering now based solely on fundamental demand and favorable affordability conditions," said NAR chief economist Lawrence Yun.

Pending home sales were up 9.8 percent in the 12 months through November.

The housing market has turned the corner after a dramatic collapse, which dragged the economy through its worst recession since the Great Depression of the 1930s.

Home sales and prices are rising, encouraging builders to undertake new construction projects.

Home resale contracts were up in three of the country's four regions. They were unchanged in the South.

(Reporting By Lucia Mutikani; Editing by Neil Stempleman)