Sales of existing homes dropped in October while prices continued to fall as prospective buyers put on hold as they remain cautious due to the weak economy.The National Association of Realtors reported Monday that sales of existing homes slid 3.1 percent to 4.98 million in October from a September reading of 5.14 million.

The drop was bigger than expected which was 5.05 million.

On a year-over-year basis, sales dropped 1.6% during the said month."Many potential homebuyers appear to have withdrawn from the market due to the stock-market collapse and deteriorating economic conditions," said Lawrence Yun, NAR chief economist, in a statement. The national median sales price for existing-home in October was $183,300, down 11.3% from a year ago when the median was $206,700.

In September, the median existing-home price was $191,400. This was the largest year-over-year drop on records since 1968, and the lowest median sales price since March 2004 when it stood at $183,200.The large number of foreclosures and distress sales, which distorts the comparison to last year's October median price caused home prices to further fall, said NAR spokesman Walter Molony.

"About 45% of all sales in October were distressed sales," Molony said. Still, falling home prices suggest that the market is in the correction stage moving toward "price equilibrium," Molony said.

The current national housing inventory at the end of October eased 0.9% to 4.23 million existing homes, according to the report. At the current sales pace, that represents a 10.2 months of supply, which is would be longer than it was in September with only 10-month supply.

Sales declined nationwide on a monthly basis contrary to what is happening in the West where there was a rise of 37.5% over year-ago levels, implying that some buyers are would want to benefit from the distressed sales in overbuilt areas in California and Nevada.