WASHINGTON (MarketWatch) — Sales of existing homes fell 2.2% in October, according to a report released Tuesday, with activity remaining mired near record lows as worries over prices, a glut of foreclosed properties, restrictive credit and high unemployment combine to weigh on the market.

The National Association of Realtors reported that sales fell to a seasonally-adjusted annualized rate of 4.43 million after a 10% pick-up in September. Year-over-year, sales fell 25.9%.

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The number wasn’t a surprise as pending-home sales data suggested such a decrease; economists polled by MarketWatch expected a pace of 4.45 million units in October.

“Home sales have decidedly taken a mini-leg down in the second half of this year, with the six-month moving average still reaching new record lows,” said Michelle Meyer, an economist at Bank of America Merrill Lynch.

“This weakness reflects a payback from the homebuyer tax credit, but also a fundamental weakening in demand for homes reflecting high unemployment, tight credit and expectations of further home price declines.”

The trade group is predicting that for 2010 sales will reach 4.8 million, a drop of 6.6% from 2009 levels, and rise to 5.1 million in 2011.

Lawrence Yun, chief economist for the NAR, said some of the temporary foreclosure suspension by leading mortgage lenders may have weighed on activity. He said November’s data may get a slight boost since foreclosure activity has re-started.

Distressed homes accounted for 34% of all sales in October, compared with 35% in September.

Concerns over mortgage paperwork, however, is hardly the only factor affecting housing. The level of sales is far below the 5.26 million pace seen as recently as June, as a tax credit for first-time homebuyers has expired.

Prices fell 0.9% from a year ago to $170,500. Median prices have ranged from as low as $164,600 to as high as $183,000 this year.

Prices in the winter typically are lower as families usually move in the summer. Prices rose in the northeast but fell in the other regions, including a 4.8% drop in the west.

Realtors are split on where prices will be one year from now, Yun said, citing a survey of over 2,000 real-estate agents.

Inventories fell from 4.04 million to 3.86 million, leaving 10.5 months of inventory, slightly down from September’s 10.7 months.

“Inventories are very high relative to sales rates, and would probably be even more so if all those wishing to sell their home actually had the house on the market instead of pulling it off in the face of eroding prices,” said Joshua Shapiro, chief U.S. economist at MFR Inc.

Yun said overly stringent underwriting standards are weighing on the market, and that there could be an “upside surprise” if credit availability was extended to more qualified home buyers.

All-cash sales were at 29% in October, up from 20% during the same period last year.