Pending home sales, a leading indicator of the health of the housing market, plunged in February across all regions in the U.S.

The National Association of Realtors’ (NAR) Pending Home Sales Index, which tracks the number of homes that are under contract to be sold, fell 10.6% in February from a month earlier — falling for the second straight month. The results missed analysts’ expectations of pending home sales declining 3%, according to Bloomberg consensus estimates. Sales for the first time after eight consecutive months of annual gains, slid 0.5% in February from the same month a year ago.

“The demand for a home purchase is widespread, multiple offers are prevalent, and days-on-market are swift but contracts are not clicking due to record-low inventory,” said Lawrence Yun, NAR’s chief economist, in a press statement.

The number of homes for sale, otherwise known as inventory, fell to a record low of 1.03 million units in February, the same as in January, according to revised NAR data. That was down 29.5% from one year ago — the largest annual decline on record. Typically you see an increase in inventory from January and February but that did not occur this year, according to Yun. The tight supply is pushing home prices up to new record levels.

“If there were a larger pool of inventory to select from — ideally a five- or a six-month supply — then more buyers would be able to purchase properties at an affordable price,” said Yun.

Properties typically remained on the market for 20 days in February, down from 21 days in January and from 36 days in February 2020 — the swiftest pace since NAR started tracking how many days units stay on the market. Seventy-four percent of the homes sold in February 2021 were on the market for less than a month. A year ago there was 3.1 months supply of inventory; currently there's a two-month supply of inventory at the current sales pace.

“While demand likely remained strong, low inventory will continue to hamper home sales in the near term,” said Nomura in a recent note.

Despite the COVID-19 pandemic and nationwide lockdowns, housing had remained a bright spot in the U.S. economy last year as pent-up demand, historically low interest rates and the desire for more space to work from home nudged homebuyers off the sidelines.

The latest pending home sales results may be a sign that the hot housing market may be cooling off. This comes as mortgage interest rates inch up above 3% for the first time since July 2020.

“The housing market of 2021 will be different than that of 2020,” said BofA Securities in a recent note. “Consider the differences between this 2021 and 2020: mortgage rates are rising, consumers are shifting spending to reopening activities vs. at-home and we aren't looking at the same degree of pent-up demand as in early 2020. We think housing activity is set to moderate.”