The National Association of Realtors reported a 12.4 percent drop in home prices during the last quarter of 2008. This is the largest year-over-year fall since the industry association started tracking in 1979.

The median price for a home sold during the fourth quarter of 2008 sharply fell to $180,100 from $205,700 during the same period in 2007 when conditions were more balanced. The median is where half sold for more and half sold for less.

Home prices fell by a record 9.5 percent in 2008, to $197,100 from $217,900 in 2007 while median home prices drop only by 1.6 percent between 2006 and 2007.

Distressed sales which include foreclosures and short sales accounted for 45 percent of all deals in the fourth quarter.  

NAR is hoping that the stimulus bill before Congress will provide an extra incentive for buyers and help boost the market."Assuming housing provisions in the economic stimulus package are quickly enacted and provide enough encouragement for homebuyers, we could see a quick lift in home sales for the critical spring home-buying season," said Yun.