Fewer Americans signed contracts to buy previously owned homes in October as credit markets seized, signaling the housing slump will extend into next year.
The index of signed purchase agreements, or pending home resales, fell a less-than-forecast 0.7%, to 88.9, from a revised 89.5 in September, according to a report the National Association of Realtors released Tuesday.
Gains in the South and Northeast offset weakness in the West and Midwest.
The drop in prices has attracted some buyers, preventing even steeper sales declines.
The "fundamentals of housing remain quite depressed," Dana Saporta, an economist at Dresdner Kleinwort in New York, said before the report's release.
"Credit constraints are a major hurdle," Ms. Saporta said. "There's a huge inventory, so prices will come down further."
Economists expected pending sales to fall 3% after an originally reported drop of 4.6% in the prior month, according to the median forecast of 35 economists in a Bloomberg News survey.
Estimates ranged from a gain of 2.5% to a 7% drop.
The Realtors group, whose pending-sales data goes back to January 2001, started publishing the index in March 2005.
The gauge was down 1% from October 2007.
Pending resales jumped 7.8% in the South and 0.6% in the Northeast. They slumped 8.7% in the West and 4.3% in the Midwest.
Demand for housing remains "uneven" across the country, with some markets in Florida, California, and the Las Vegas region showing "healthy gains" from the same time last year, the Realtors said.
Pending resales are considered a leading indicator because they track contract signings.
Closings, which typically occur a month or two later, are tallied in the Realtors' report on sales of existing homes, due Dec. 23.
Purchases of previously owned homes, which account for about 90% of the market, fell in October and prices plunged by the most on record.
October sales of new homes, which account for the remainder, dropped to the lowest level in 17 years.
With the economy gripped by a recession, house prices have fallen by about a fifth from their peaks in mid-2006, according to the S&P/Case-Shiller home price index.
Prices "have to decline another 10% to 15% before they get back to pre-bubble levels," Martin Feldstein, a Harvard University economics professor, said in an interview Tuesday. "The danger is it's worse than that."
Real estate businesses are struggling. LandAmerica Financial Group Inc., the third-largest U.S. title insurer, filed for bankruptcy protection last month. A "brutal real estate, credit, and capital market environment" led to the filing, said Theodore L. Chandler Jr., LandAmerica's chairman and chief executive.
