updated 12/4/2006 10:42:40 AM ET 2006-12-04T15:42:40

Pending sales of existing U.S. homes fell 1.7 percent in October but held above the low hit in July, suggesting the housing market is stabilizing, a real estate trade association said on Monday.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in October, fell to 107.2 from 109.1 in September.

It was a steeper drop than analysts had expected. The median forecast of a Reuters poll of economists was for an October index level of 108.6.

The October level was 13.2 percent below the year-earlier level, a slimmer drop than the 13.6 percent year-on-year decline posted in September.

The trade association noted the index had been range-bound in recent months and cited the narrowing in the decline from year-ago levels as a sign that the beleaguered U.S. housing market was stabilizing.

"It's important to focus on where the housing market is now -- it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high," David Lereah, chief economist for the trade association, said in a statement.

The index covers pending sales of existing single-family units, condominiums and co-ops. A home sale is pending when a contract has been signed but the transaction has not closed.

Pending sales typically close within one or two months of contract signing.

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