The NAR’s Pending Home Sales Index, which is based on contract signings, increased to 109.0 in December from 107.3 in November.
Lawrence Yun, NAR chief economist, said contract activity ended well in 2016.
"Pending sales rebounded last month as enough buyers fended off rising mortgage rates and alarmingly low inventory levels to sign a contract," Yun said. "The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs. Sales will struggle to build on last year's strong pace if inventory conditions don't improve."
Year-over-year, sales increased by 10% for homes sold at or above $250,000; homes sold between $100,000 to $250,000 increased by 2.3%; and homes under $100,000 decreased by 11.6%.
"The dismal number of listings in the affordable price range is squeezing prospective first-time buyers the most," Yun said. "As a result, young households are missing out on the wealth gains most homeowners have accrued from the 41% cumulative rise in existing home prices since 2011."
Morning Briefing: Pending home sales rebounded at end of 2016
2016 best year in existing-home sales in a decade
Pending home sales picked up at the end of 2016, according to new data from the National Association of Realtors.