Pending home sales, a leading indicator of the health of the housing market, remained steady in the final month of 2020.

The National Association of Realtors’ (NAR) Pending Home Sales Index, which tracks the number of homes that are under contract to be sold, slid 0.3% to 125.5 in December from the previous month, less than the expected 1% decline by analysts, according to Bloomberg. The index level is also at an all time high for a December, NAR said. It marked the fourth straight monthly decline, but marked a 21.4% increase from December 2019.

A high demand for housing

“Pending home sales contracts have dipped during recent months, but I would attribute that to having too few homes for sale,” said Lawrence Yun, NAR’s chief economist, in a press statement. “There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings.”

A separate report by brokerage Redfin released on Friday found that pending sales were up 43.5% in rural areas in the U.S., 35.1% in suburban areas and 32.4% in urban areas during the four weeks ending Jan. 21.

"Homes in rural and suburban areas remain popular as the pandemic and remote work continue to motivate buyers to prioritize indoor and outdoor space over commute times and urban amenities,” said Redfin chief economist Daryl Fairweather, in a press statement.

Total inventory in the U.S. at the end of December was 1.07 million units, down 16.4% from a month earlier and down 23% from a year ago, according to the NAR. Unsold inventory is now at an all-time low of 1.9 months’ supply at the current sales pace, down from 2.3 months in November.

"The scarcity of rural and suburban homes for sale is driving the overall housing supply shortage,” said Fairweather. “Many homeowners are staying put, and homes in those neighborhoods are snapped up as soon as they're listed for sale."

Historically low interest rates and low inventory have driven home prices up last year. Home price growth has grown at the fastest rate since 2014.

“We can expect further upward pressure on prices for the foreseeable future,” said Yun, who predicts that 2021 will bring about strong economic growth, supported by low mortgage rates and fiscal stimulus, which in turn will bolster existing-home sales to reach 6.49 million, a 15% increase from 5.64 million in 2020. Last week, the NAR reported that existing home sales in 2020 reached its highest level since 2006.

Amanda Fung is an editor at Yahoo Finance.

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