The number of pending home sales in the United States posted a stronger increase in December following a more sluggish reading in the previous month, according to the National Association of Realtors.

The group's Pending Home Sales Index for the month rose to 109, up 1.6 percent from November's figure of 107.3. The index was relatively unchanged from the previous year, up only 0.3 percent from the December 2015 figure of 108.7.

December's gain was a marked change from the previous month, when the PHSI was at its second lowest reading of the year. November's figure, which was down 2.5 percent from the previous month and 0.4 percent from the previous year, was at its lowest point since the January 2016 index of 105.4.

The PHSI measures transactions where a contract has been signed but the sale has not yet been finalized, an action which typically occurs within one or two months. The index usually represents about 20 percent of existing home sales and is used as a forward looking indicator for upcoming existing home sales activity.

A value of 100 indicates that contract activity is equal to 2001 levels. The volume of existing home sales in that year fell between 5 million and 5.5 million, which is considered normal for the current U.S. population.

"Pending sales rebounded last month as enough buyers fended off rising mortgage rates and alarmingly low inventory levels to sign a contract," said Lawrence Yun, chief economist at the National Association of Realtors. "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."

Existing home sales closed out 2016 with a total of 5.45 million transactions, the highest level since 2006. The National Association of Realtors says this marked a 3.8 percent increase in sales and a 5.2 percent growth in median prices from the previous year. The organization forecasts a total of 5.54 million existing homes this year, a more modest growth of 1.7 percent.

The pending sales report notes how renters may consider it a less advantageous time to buy a home when faced with a limited inventory as well as higher prices and mortgage rates. In the National Association of Realtors' Housing Opportunities and Market Experience survey for the fourth quarter of 2016, 57 percent of renters said they consider it a good time to buy – down from 60 percent in the third quarter and 68 percent in the fourth quarter of 2015.

Yun said sales data for December indicates that housing supply is tighter in the lower price ranges. While single-family home sales selling for $250,000 or more were up 10 percent compared to the previous year, they were only up 2.3 percent for homes priced between $100,000 and $250,000. Sales of homes for under $100,000 were down 11.6 percent from December 2015.

"The dismal number of listings in the affordable price range is squeezing prospective first-time buyers the most," said Yun. "As a result, young households are missing out on the wealth gains most homeowners have accrued from the 41 percent cumulative rise in existing home prices since 2011."

Yun said an easing of construction regulations could result in a higher supply of available homes this year. He predicts that housing starts for 2017 will be about 1.26 million, up 7.9 percent from 2016.

Pending home sales varied from region to region. In the Northeast, the PHSI fell 1.6 percent from the previous month and 1.2 percent from the previous year to 96.4. The Midwest also experienced a decrease in pending sales, with its index falling to 102.7 – down 0.8 percent from November and 3.4 percent from December 2015.

In the South, the PHSI rose 2.4 percent from the previous month and 0.5 percent from the previous year to reach 121.3. The West had a 5 percent increase from both the previous month and previous year, with its PHSI hitting 106.1.