The National Association of Realtors said the index, which tracks contracts of intention, dropped 4.3 percent from November to 101.7 from 106.3. The index, however, was 6.9 percent above December 2011, when the pending sales barometer was at 95.1.
NAR Chief Economist Lawrence Yun said the index, which as risen 20 consecutive months on an annual basis, was held back in December by limited supplies of cheaper homes.
"Supplies of homes costing less than $100,000 are tight in much of the country, especially in the West, so first-time buyers have fewer options," Yun said in a statement.
A seasonal upswing in inventories in the spring should allow for more contracts "but a seller's market may be developing," Yun said.
"Much of the West is already a seller's market for homes priced under a million dollars but conditions are much more balanced in the Northeast," he said.
The Pending Home Sales Index for the Northeast fell 5.4 percent from November to December to 78.8.
The index rose a marginal 0.9 percent in the Midwest to 104.8. In the South it fell 4.5 percent to 111.5 and in the West it dropped 8.2 percent to 101.
Of the four regions, however, only the index for the West is down on a 12-month basis. In the West, the index is off 5.3 percent from a year earlier.