Despite a slight month-over-month dip during the last month of 2020, Pending Home Sales — a forward looking indicator of home sales based on contract signings— registered as the highest ever recorded in the month of December, according to the National Association of Realtors.

While the latest Pending Home Sales Index shows that contract signings were down 0.3% to 125.5 in December, activity was still up 21.4% from a year earlier.

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

According to Yun, elevated demand without a significant boost in supply has caused home prices to increase. “We can expect further upward pressure on prices for the foreseeable future,” he added.

Compared to a year ago, all four regions witnessed double-digit gains in pending home sales transactions.

In the Midwest, the index fell 3.6% to 111.7 last month, but was up 13.9% from December 2019.

Yun expects that pattern to continue, projecting strong economic growth for 2021, supported by low mortgage rates and fiscal stimulus, which in turn will bolster existing-home sales.

With 30-year fixed mortgage rates expected to remain low, Yun said that existing-homes sales are likely to reach 6.49 million, which would be a 15% increase from 5.64 million in 2020. “

There will also be slower home price appreciation, likely 6.6%, as increased confidence from homebuilders will ultimately lead to an increase in housing starts,” he added.