Pending home sales increased 1.6% to an index reading of 109.0 in December, after an unrevised 2.5% drop to 107.3 in November, according to a report released Monday by the National Association of Realtors.
An index of 100 is equal to the average level of contract activity during 2001.
Year-over-year the pending homes sales index increased 0.3% from last December, when the index was 108.7.
Regionally, pending sales were mixed. The Northeast saw a 1.6% decrease to 96.4, while sales fell 0.8% to 102.7 in the Midwest. Sales gained 5.0% in the West to 106.1 and sales grew 2.4% in the South to 121.3.
"Pending sales rebounded last month as enough buyers fended off rising mortgage rates and alarmingly low inventory levels to sign a contract," NAR Chief Economist Lawrence 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."
The lack of listing in an affordable range is hurting prospective first-time buyers the most, he noted.
Economists polled by Thomson Reuters predicted the index would be up 1.1%
