Foreclosures on deeds of trust in Spokane County rose for the fifth consecutive year in 2011, climbing 7 percent to within 40 of the peak 1,152 foreclosures recorded in 2002, auditor's office data show.

The rate of increase has slowed, though, dropping from 12 percent in 2010, 65 percent in 2009, and a whopping 84 percent in 2008. At least one economic forecaster says foreclosures here may have peaked last year, while total defaults in Kootenai County may have peaked a year earlier.

Randy Barcus, chief economist for Spokane-based Avista Corp., says the current trend in foreclosure numbers is "more than flattening."

Comparing foreclosure numbers in the second half of 2011 to the year-earlier period, mortgage defaults had dropped by 18 percent, Barcus says.

"I expect to see a significant drop in 2012, much like after foreclosures peaked in 2002," he says. They bottomed out at 269 in 2006.

He predicts the yearly foreclosure numbers will be down to the 500-to-600 level by 2013.

"It's never good when foreclosures happen," he says. "But even during the peak of the last housing cycle, there were roughly 300 foreclosures."

Foreclosure trends often are linked to the unemployment rate trend. The Spokane County unemployment rate in November was 8.1 percent, down from 8.8 percent a year earlier, according to the Washington state Employment Security Department.

While Barcus says 2012 employment growth might be sluggish, a lot of people who are employed and can afford to buy a house are waiting for prices to hit the bottom.

"I think this is it," he says. "Prices are low, and mortgage interest is amazingly low."

Phil Kuharski, a longtime observer of the Spokane economy, says the foreclosure trend appears to be leveling off. It also might be in an "uncomfortable holding pattern," Kuharski says, and he's not ready to predict a dramatic turnaround.

"Now, I feel we'll do well to hold the number where it's at and maybe bring it down little," Kuharski says.

The biggest issue is economic uncertainty, he says.

Kuharski says uncertainty likely will persist through the presidential election and resolution of the European debt crisis.

"We're way short on jobs," Kuharski says. "I see a number as high as 20,000 (more) people who would be working here if all the pieces were in place."

Falling home values likely will slow any improvement trend in foreclosure numbers, he says. Many "marginal buyers" going back seven or eight years now have homes that are worth less than they can sell them for.

"A lot of people are making payments hoping things turn around," he says. "If they keep making payments and keep their jobs, they'll probably see some turnaround in 2013 to 2014."

The median sales price for homes sold in Spokane County through the Spokane Association of Realtors' Multiple Listing Service in 2011 was $154,900, down 5 percent from the median sales price in 2010, and down more than 16 percent from the 2007 peak of $185,400.

Rob Higgins, executive vice president of the Spokane Association of Realtors, says foreclosure sales are continuing to pressure home prices downward.

Higgins says 22 percent of home sales in Spokane County in 2011 were foreclosed properties. That doesn't bode well for this year, which he predicts will bring another drop in home prices and foreclosures numbers similar to last year.

"I think we're still going to see prices come down this year because of the influence of distressed sales," he says. "I would say a good 50 percent of the price decline has been caused by distressed sales."

The total number of homes sold through the MLS in 2011 fell to 4,020, down 5.5 percent from a year earlier, although sales in each month of the second half of the year outpaced those in the first half.

Avista's Barcus says Kootenai County's foreclosure numbers demonstrate a substantial change in direction, though they are still high.

"They peaked in 2010," he says.

The latest Real Estate Report, compiled by the Spokane-Kootenai Real Estate Research Committee, says 1,485 foreclosure actions were reported there in the first nine months of 2011 and estimates the final total for the year will be 1,980, down 31.7 percent from a year earlier, when foreclosure notices peaked at a six-year high of 2,903.

Kootenai County's foreclosure actions are reported differently than those in Spokane County, and the numbers reported for the two counties aren't directly comparable, because not all of the actions reported in Kootenai County result in foreclosure.

Despite the apparent improvement in Kootenai County, bank-owned properties, most of which were foreclosed properties, still accounted for 32 percent of home sales in 2011, says Kim Cooper, broker with Select Brokers of Coeur d'Alene and a spokesman for the Coeur d'Alene Association of Realtors. The median home sales price in 2011 was $150,000, a drop of 9.1 percent from a year earlier.

Last year, however, marked the third consecutive year of increases in unit sales, with 1,996 homes sold through the Coeur d'Alene Association of Realtors MLS, up from 1,893 in 2010.

Cooper says he expects foreclosure numbers to reach more normal levels when the unemployment rate falls below 8 percent.

The November 2011 unemployment rate in Kootenai County was 9.8 percent, down from 11.3 percent a year earlier, according to Idaho Department of Labor figures.