) -- Weak consumer confidence and tight lending continues to put a damper on the number of Americans buying homes.

A reading on the number of contracts to buy previously owned homes dropped 4.6% in September to an index reading of 84.5 from 88.6 in August, according to a National Association of Realtors report released Thursday morning. The latest figure was disappointing given that economists projected a flat reading after sales dropped by 1.2% in August.

However, pending home sales improved from a year earlier, when the reading on NAR's index came in at 79.4 in September 2010.

"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," said NAR chief economist Lawrence Yun.

Pending home sales are viewed as an indicator of future home sales since they reflect contracts -- not closings -- and generally occur with a lag time of one to two months.

Even though 30-year mortgage rates have fallen to around 4%, Americans remain reluctant to invest in real estate. High unemployment has kept Americans from feeling secure, prompting less spending and a reduction of household debt.

A separate report on the housing sector from Tuesday showed some improvement in new home sales in September. New home sales jumped 5.7%, as home prices decreased. However, optimism about a housing sector comeback remains low.

-- Written by Chao Deng in New York.

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