Sales of existing homes rose 6.5% in December

Sales of existing homes rose 6.5% in December to a seasonally adjusted annualized rate of 4.74 million, led by a big rebound in the West where prices have fallen more than 30%.

I'm not sure if foreclosure sales are included in this data because many foreclosure sales are handled outside the Realtors' system and are not reported by the National Association of Realtors (NAR).  Moreover, about 45% of the transactions in December were considered distress sales, either a short sale or a home in foreclosure.

The median sales price fell to $175,400 in December, down a record 15.3% compared with a year earlier.  For all of 2008, median prices dropped 9.3% to $198,600, the lowest level since 2004.  An economist for the NAR believes it to be the sharpest price decline since the Great Depression.

So the belief was that low prices are bringing in buyers and this is removing the overhang of inventory in the housing market, but that may not be entirely true.  There is probably even more excess housing inventory gumming up the market than current statistics indicate, thanks to a wave of foreclosures that has yet to hit the market.

Banks are calling their massive and growing inventory of distressed and foreclosed homes "ghost inventory" - and keeping it off the market.  Banks are withholding adding the "ghost inventory" to the listing for fear of further depressing the already low and declining sale prices.  RealtyTrac, for example, looked into this and found that its listings in four states, California, Maryland, Florida and Wisconsin, and found that they contained only a third of the foreclosures it has in its database.

Since RealtyTrac has a total of 1.5 million bank-owned properties on its site, the good news of declining inventory may be a mirage.

Home prices falling at record pace in Case-Shiller index

Home values in 20 major U.S. cities fell at a record 18.2% in the 12 months ending in November, Standard & Poor's reported Tuesday. The Case-Shiller 20-city home price index fell 2.2% in November, with home values in all 20 cities falling at least 1%. 

Prices fell 3.4% in Phoenix and 3.3% in Las Vegas in November. In the past year, prices were down 33% in Phoenix, 32% in Las Vegas, and 31% in San Francisco. 

The best performance over the past year came in Dallas, where prices fell just 3.3%. 

Falling home values have helped to plunge the global financial system into chaos because of mortgage-backed securities. Home owners have lost trillions of dollars of wealth.

Home Builders' Confidence Keeps Eroding

The National Association of Home Builders released results of a monthly survey of builders' thoughts on market prospects. Its January index for sales of new, single-family homes fell to 8 from 9 in December.

The reading of builder confidence this month marks a new record low.

The latest government data show new-home sales dropped by 2.9% to 407,000 in November. Year-over-year, sales were 35.3% lower. People aren't buying because of the recession and because prices keep falling. Receding demand is keeping supplies high, discouraging construction. Housing starts in December decreased 18.9% to a seasonally adjusted 625,000 annual rate compared to the prior month.  

Illinois properties with foreclosure activity up 55% in '08; ILL ranks 9th in the nation in foreclosures

The number of properties that faced foreclosure proceedings rose almost 55 percent in Illinois last year compared with 2007, a dismal result but better than the 81 percent increase for the country overall.

More than 2.3 million properties faced foreclosure proceedings last year, according to RealtyTrac, a foreclosure listing firm based in Irvine, Calif., which compiled the figures.

The worst is yet to come as consumers grapple with layoffs, shrinking investment portfolios and falling home prices.

In Illinois, 99,488 properties had at least one foreclosure-related filing last year, up almost 55 percent from 2007. RealtyTrac said 1.9 percent of the state’s housing units had a foreclosure filing in 2007, the ninth-highest rate in the country.

In the Chicago market, 77,226 properties, or 2.5 percent of the housing units, faced a foreclosure filing last year, up 53.4 percent from 2007, RealtyTrac said.

The Lake/Kenosha market saw 6,323 properties, or 2.5 percent, get at least one notice last year, an increase of 70.1 percent compared with 2007.

Nationwide, more than 860,000 properties were actually repossessed by lenders, more than double the 2007 level, according to RealtyTrac.

Moody's Economy.com, a research firm, predicts the number of homes lost to foreclosure is likely to rise by another 18 percent this year before tapering off slightly through 2011.

Still, foreclosures — which keep breaking records going back 30 years, according to the Mortgage Bankers Assn. — are likely to remain well above normal levels for years to come, and that will continue to keep home prices from rebounding.

"Hitting bottom is a lot different than coming off the bottom," said Christopher Thornberg, a principal with Beacon Economics in Los Angeles.

The RealtyTrac report comes as Democrats, including President-elect Barack Obama, develop plans to use up to $100 billion of the remaining $350 billion in financial bailout money in an attempt to prevent the foreclosure crisis from getting even worse.

The four states with the highest foreclosure rates last year were Nevada, Florida, Arizona and California.

More than 1.1 million properties in those four states received a foreclosure notice, almost half the national total. And more than one in five of those households were in California, which is coping with massive job losses in the housing and mortgage industries as well as a rapid decline in home prices.

Among metro areas, Stockton, Calif., was first, with 9.5 percent of all housing units receiving a foreclosure filing last year. It was followed by Las Vegas, Riverside and Bakersfield, Calif., and Phoenix.

In December, more than 303,000 properties nationwide received at least one foreclosure notice, up more than 40 percent from a year earlier and up 17 percent from November, according to RealtyTrac.

Nearly 79,000 properties were repossessed by lenders in December, a 61 percent increase over a year ago.

New state laws, particularly in California, Massachusetts and Maryland, that required giving homeowners advance notice of foreclosure proceedings, reduced filings in several states. But the effect of those laws has worn off, and lenders appear to be going ahead with foreclosure, rather than trying to modify loans.

"If all you're doing is basically giving a stay of execution, then the inevitable will follow," said Rick Sharga, RealtyTrac's vice-president for marketing.

Foreclosures would have been about 10 percent higher in California last year, Sharga said, if it were not for a law requiring lenders to give borrowers a 30-day warning before starting the foreclosure process.

Meanwhile, the president of the Federal Reserve Bank of Philadelphia said Wednesday he expects the economy to slowly start recovering in the second half of 2009 and inflation to remain below 2 percent over the next year.

In a speech at the University of Delaware, Charles Plosser also said the unemployment rate probably won't drop anytime soon, but that he doesn't expect it to rise to double digits, as it did during the recession of the early 1980s.

"I expect the housing sector will finally hit bottom in 2009 and the financial markets will gradually return to some semblance of normalcy," said Plosser, adding that the current recession could be one of the longest in the post-World War II era.