Contract signings for existing-home sales dropped last month, resulting in a 4.3% decline in the National Association of Realtors’ Pending Home Sales Index, though the forward-looking indicator managed to stay above year-ago levels for the 20th consecutive month.

While “4% is not a small number,” NAR’s chief economist Lawrence Yun conceded, “the supply limitation appears to be the main factor holding back contract signings,” he said in a statement discussing the numbers. 

Yun pointed to year-over-year data showing the West as the only one of the country’s four regions to post an annual decline in pending home sales, while also posting the tightest supply of for-sale homes and the largest annual home-price growth of any region, “clearly implying it’s a supply-constrained slowdown.”

On a monthly basis, however, contract signings were down in three regions, including the Northeast, South, and West—drops partly fueled by a need for more homes targeted to first-time buyers, Yun said.

Relief from low inventory levels will need to come from new-home builders, Yun said, adding that despite a moderate pickup in starts over recent months, activity still remains below levels seen in the early 1980s when the interest rate stood at 18%. 

See NAR’s full release discussing December’s pending home sales report.

Claire Easley is a senior editor at Builder.