WASHINGTON, (Reuters) – Due to record-low inventory in the United States, contracts for buying previously owned homes dropped for the second consecutive month in December.

According to the National Association of Realtors, its Pending Home Sales Index (based on contracts signed) fell by 3.8% to 117.7 last month. In all regions, pending home sales declined.

Reuters polled economists to predict contracts. These become sales within a few months. However, Reuters found that 0.2% of them had dropped in forecasts. On a year-on, basis, the December Pending Home Sales decreased 6.9%.

According to Lawrence Yun (NAR chief economist), “Pending home sales declined towards the end 2021 as consumers had very limited options.”

Sales are being hampered by a severe shortage of homes that have been owned previously. The demand for housing will remain strong despite rising mortgage rates and high home prices.

Yun said that the market would likely see a small drop in sales as long as mortgage rates remain high.

In 2021, 6.12 Million homes that were previously owned were sold. This is the highest number of properties ever since 2006. It also represents an 8.5% increase over 2020.

On Wednesday, the Federal Reserve stated that it will likely raise interest rates for high inflation in March.