The number of existing homes sold in December unexpectedly increased 6.5% from the previous month where bargain hunters where seen as seizing the opportunity of record low home prices according to a report released Monday. Lower home prices were caused by the high volume of distressed sales, which covers 45% of December sales according to the report.

The National Association of Realtors said that home sales rose to a seasonally-adjusted annual rate of 4.74 million in December from a downwardly revised pace of 4.45 million sold in November.

Analysts, however, warned that prices have not reached its bottom and are likely to fall further through 2009, and said the outlook for home sales is still highly unpredictable despite low mortgage rates and government relief efforts.

The nationwide median sales price dropped to $175,400, down 15.3 percent from $207,000 a year ago. Bargain prices are enticing buyers back into the market.  That was the lowest price since May 2003 and the biggest year-over-year decline on records since 1968. In 2008, there were 4,912,000 homes sold, the lowest volume since 1997 when there were 4,371,000 homes sold.

Sales volume in 2008 was down 13.1% from the 5,652,000 existing homes sold a year ago. With the sales increase, the number of homes available on the market decreased 11.7% in December from the previous month, to 3.68 million which is about 9.3-month inventory supply at the current pace of sales. That was down from an 11.2-month supply in November.

"The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal, balanced conditions," said NAR chief economist Lawrence Yun in a written statement.

In the West, the existing home sales increased 13.6 percent to an annual rate of 1.25 million in December up 31.6 percent compared to December 2007. The median price in the West was down 31.5 percent to from December 2007 figure of $213,000.

In the South, number of homes sold surged 7.4 percent to an annual pace of 1.74 million in December, but that was still 11.2% lower than December 2007 figures.

In the Midwest increased, there was a 4 percent in December to an annual rate of 1.04 million, but dropped 10.3 percent from the same period last year.

The Northeast saw sales dropped 1.4 percent to an annual pace of 720,000 in December, down 14.3 percent a year ago.