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Today, the National Association of Realtors (NAR) released its Pending Home Sales Report for September showing that home sales declined with the seasonally adjusted national index dropping a notable 4.6% since August but increasing 6.4% above the level seen in September 2010.

Meanwhile, the NAR's chief economist Lawrence Yun suggests that home buyers were sidelined by weak confidence in the economy and confusing policy coming out of the Fed while the most likely explanation for the latest round of weak results is that buyers simply see that prices are headed lower. Who in this economy would leverage up significant debt to buy an asset that is clearly still declining in value?

"A combination of weak consumer confidence and continuing tight lending criteria held back home buyers, even though the private sector added nearly 2 million net new jobs in the past 12 months ... America’s monetary policy is contradictory and confusing, where some consumers with the best financial capacity and top-notch credit scores pay higher mortgage interest rates ... The Federal Reserve evidently has been attempting to lower mortgage rates, yet more consumers are faced with taking out jumbo loans that carry higher interest rates. ... Just leaving excessive cash to sit in banks and not work into the economy is a drag on the overall recovery ... We need a comprehensive approach to address housing issues – not additional impediments."

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Source: Pending Home Sales Drop 4.6% In September