Existing homes going under contract declined in September, likely in part the result of the beginning of foreclosure moratoriums in response to allegations of paperwork errors, the National Association of Realtors reported Friday.

NAR, which released the data at a conference and thus later than its usual 10 a.m. delivery, said its Pending Home Sales Index (PHSI) slipped slipped 1.8% to 80.9 in September from an upwardly revised 82.4 in August. The index remains 24.9% below a tax-credit fueled surge to 107.8 in September 2009.

"Existing-home sales have shown some improvement but the foreclosure moratorium is likely to cause some disruption and contribute to an uneven sales performance in the months ahead," said Lawrence Yun, the NAR's chief economist. "Nonetheless, there appears to be a pent-up demand that eventually will be unleashed as banks resolve their issues with foreclosures and the labor market improves. However, tight credit and appraisals coming in below a negotiated price continue to constrain the market."

Regionally, the PHSI in the Northeast slipped 1.7% to 59.6 in September, 28.3% below a year ago. The Midwest fell 5.7% to 64.2, 33% below September 2009. The South declined 3.5% to 87.6, 19.1% below a year ago. The West rose 3.5% to 104.6, still 24.7% below September 2009.

The NAR sees some improvement to come. "For 2011 we should see more than 5.1 million existing-home sales, up from about 4.8 million this year," said Yun."Housing starts are expected to rise to 716,000 in 2011 from 598,000 this year. We¹ve added 30 million people to the U.S. population over the past 10 years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum."

Yun said the Realtors expect mortgage rates to continue bouncing along a bottom before rising to an average of 4.9% in 2011 and 5.8% in 2012.

J.P. Morgan analyst Michael Reahaut took the news in stride. "While September¹s decline, which follows August¹s 4.3% rise, is a slight negative, in our view, we note that the level is still ahead of July¹s 78.9 and the recent June trough of 75.5, and accordingly, we believe that the market continues to stabilize and slightly improve following the expiration of the tax credit," he wrote in a research note. "Moreover, we remain comfortable with the supply dynamics in the market, as we note that existing homes for sale remain 12% below peak levels and have roughly been in line with seasonal trends year-to-date, while the liquidation of distressed real estate, including foreclosures and shadow inventory, remain at a moderate and consistent pace, in our view."

Carl Reichardt at Wells Fargo Securities said in his investor note that he expected the impact of the foreclosure issue to be more evident in the October PHSI, which will be released in a month. Taken with recent commentary from new-home builders, he said, the PHSI decline indicates that the housing market remains sluggish.