And even the faint promise of better days ahead might not come true, given all the headwinds the housing industry is facing at the moment.

“This is going to be another difficult spring,” said Mark Zandi, chief economist at Moody’s Economy.com. “I think we are at the beginning of the end of the housing downturn, but it is going to be a long and painful end.”

The devastation is certainly a far cry from the boom years from 2001 to 2005 when sales of new and existing homes were setting records for five straight years. During that time, home prices were soaring, luring thousands of investors into the market, hoping to buy homes and flip them for quick profit.

But since 2006, the country has been mired in a housing bust which, in many ways, is the worst since World War II. Construction is expected to drop to the slowest pace since the 1940s and prices are expected to decline by the largest amount since the Great Depression.

Hardest hit are the states where sales boomed the most: California, Florida, Nevada, Arizona and parts of the Northeast. In the Midwest, the problem is shrinking jobs in the auto industry, making homes hard to sell.

But virtually all of the country has felt the aftershocks of the housing slump, either through weaker home sales or the massive drag housing has imposed on the overall economy.

Housing has shaved more than a full percentage point off economic growth, trimming the gross domestic product for the past two quarters to a barely discernible 0.6 percent rate and raising the threat that the country could topple into a full-blown recession.

The National Association of Realtors reported that 46 states saw sales decline in the first three months of this year compared with the same period in 2007.

Two-thirds of 149 metropolitan areas saw prices decline during the same period, the largest percentage of cities reporting price drops in the history of the NAR survey, which goes back to 1979.

The state with the biggest sales decline was Maryland, with sales down 38.6 percent in the first three months of this year compared with the same period in 2007. The drop nationwide was 22.2 percent.

The price decline nationally was 7.7 percent in the first quarter, with the biggest plunge a 29.2 percent decline in the Sacramento, Calif., area. As the spring sales season got under way, the slump was continuing.

The Realtors reported Friday that existing home sales fell 1 percent in April, the eighth drop in the past nine months, with the median home price falling 8 percent compared with a year ago, the second-biggest drop on record.

So just how much worse will things get? Lawrence Yun, chief economist for the Realtors, sees some hopeful signs.

Some parts of the country that have been hammered with sharp declines in sales and prices, such as San Diego, Calif., and Fort Myers, Fla., are now reporting sales increases, as buyers are being lured back into the market, looking for bargains.

“Lower prices and low interest rates are starting to generate results,” Yun said, noting that 30-year fixed-rate mortgages averaged 5.92 percent in April, down from 6.18 percent in April 2007.

That reflected an aggressive rate-cutting effort by the Federal Reserve to try to keep the country out of a recession.

Sales should also be helped in coming months, Yun predicted, by the reappearance of more mortgage products as lenders reopen the tap for certain loans. That supply had been closed following the credit crisis that hit last August, triggered by rising defaults in subprime mortgages.

Other economists are not so optimistic, noting that the Realtors’ latest report showed the number of unsold single-family homes jumping to a 23-year high, reflecting, in part, a rising tide of mortgage foreclosures, which are dumping more homes on an already glutted market.

Adding to the foreclosure problem is the weak economy, which has resulted in four straight months of job layoffs, an indication to some analysts that the country has already fallen into a recession.

Rising job layoffs and higher gasoline and food prices have sent consumer confidence plunging — not a great environment to mount a rebound in housing.

And then there is the problem of the huge overhang of unsold homes generating further declines in prices, which seem to be keeping more prospective buyers on the fence.

“Right now a lot of people are staying away because they don’t want to buy an asset that might lose value right away,” said Patrick Newport, an economist at Global Insight.

Newport predicted that prices, which by some measures have fallen by about 15 percent nationwide from their peak two years ago, will decline another 10 percent before bottoming out in the spring of 2009.

A 25 percent fall in prices would be the biggest since home prices plunged by about one-third during the Great Depression of the 1930s.

David Seiders, chief economist for the National Association of Home Builders, said he believed sales will bottom out by the middle of this year and then start to move higher by the end of this year.

He said builders, trying to control inventories, will continue slashing production, with housing starts expected to drop by 39 percent this year following a 30 percent decline in 2007. That will push activity to the slowest annual pace since the end of World War II.

Seiders predicted a gradual rebound in construction starting next year. “This is stacking up as the most dramatic housing contraction in the post-World War II period,” he said.

And while sales, construction and prices should all start to recover by next year, the rebound is not expected to be a rapid one. Some analysts are forecasting it will take a couple of years for housing to regain its footing.

“It is going to take some time first to restore confidence that housing is a reasonably OK investment, then to work off this inventory and then for the financial system to revive,” Zandi predicted.

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More than 155,000 families have lost their homes to foreclosure this year; one out of every 194 U.S. households received a foreclosure filing.

NEW YORK (CNNMoney.com) — Foreclosure filings in the first three months of 2008 rose more than 112% over last year, according to a study released Tuesday.

Real estate information firm RealtyTrac reported that nearly 650,000 foreclosure filings – which include notices of default, auction sales and bank repossessions – were issued in the first quarter. That represents 1 of every 194 households and marks a 23% increase from the last quarter of 2007.

So far this year 156,463 families have lost their homes to repossessions.

“Foreclosure activity hasn’t slowed down yet,” said Rick Sharga, spokesman for RealtyTrac. “But I was a little surprised that foreclosure filings more than doubled since last year.”

Foreclosures increased in 46 states and in 90 of the nation’s 100 largest metro areas. Some regions that had been only marginally hurt by the mortgage meltdown recorded large increases in filings. In Connecticut, for instance, filings tripled compared with the first three months of 2007. Massachusetts recorded a 260% increase.

Nevada: Hardest hit

The worst hit states are still clustered in the Southwest; Nevada, California and Arizona lead the nation in foreclosure filings. Prices ran up rapidly in these areas during the bubble years as speculators snapped up single-family homes and condos as investments.

In the first quarter, 1 of every 54 homes in Nevada received some type of foreclosure filing – more than any other state. Its largest city, Las Vegas, had 1 out of every 44 homes go into foreclosure.

Stockton, Calif., had the highest foreclosure rate out of any U.S. metro area, with 1 out of every 30 homes receiving a notice – nearly seven times higher than the national average. The Riverside/San Bernardino region had the second highest rate in the quarter, with one of every 38 homes in default.

Only two metro areas in the ranks of the 20 hardest hit were outside the Sunbelt – Detroit, which ranked sixth in the nation with 1 in every 68 households in default, and Cleveland which saw 1 in every 105 homes go into foreclosure.

The news comes despite increased foreclosure prevention efforts by lenders and community organizations. Hope Now, the coalition of mortgage lenders, servicers investors and community groups, announced Monday that it helped over a half a million home owners avoid foreclosure during the first three months of the year.

And some local governments have stepped up their programs to help borrowers, according to RealtyTrac CEO James Saccacio.

“For example, in late March Philadelphia issued a temporary moratorium on all foreclosure auctions for April,” he said. “The city has since adopted a program that will delay foreclosure proceedings on owner-occupied properties until the owners have met face-to-face with lenders to attempt to create a loan workout plan that would prevent foreclosure.”

More trouble ahead

Additionally, lawmakers in Washington, D.C. are at work on several plans that would deliver foreclosure relief to distressed borrowers.

All of these foreclosure prevention efforts may not be able to stand up to the tsunami of foreclosures on the way. Sharga says that a record number of hybrid adjustable rate mortgages (ARMs) – worth $362 billion – will reset in 2008.

These so-called “exploding ARMs” usually have low introductory interest rates that reset much higher after two or three years, and then re-adjust as often as every six months after that. Unless these loans can be reworked, many will fail.

“We expect to see another foreclosure peak in the late third or fourth quarter of the year,” said Sharga, “because of the record number of resets coming.”