Foreclosures shot up in Illinois last year, with two-thirds of the state’s filings in Chicago, according to statistics released Thursday just as Mayor Richard M. Daley announced plans to fill vacant homes in the city’s hardest-hit neighborhoods.

More than 77,000 Chicago properties were foreclosed in 2008, a 53 percent increase over the year before, property-listing site RealtyTrac reported.

Daley said that through an umbrella organization and with $55 million in federal funds and grant money, the city will use at least 2,000 foreclosed buildings to revitalize neighborhoods with high foreclosure rates.

The city designated communities on the South Side and the West Side as “areas of greatest need,” although foreclosures occur all over the city.

The year’s sharp increase in foreclosures comes coupled with a significant number of "short sales," sales of homes  for less than the outstanding loan balance when banks won’t take them over, real estate agents say.

“The short sales are really damaging,” said Len Benefico, an agent at Koenig & Strey GMAC Real Estate’s Northwest Side office. “There are tons and tons and thousands and thousands out there. They glut the market.”

Banks, some agents say, want to avoid foreclosing on homes in a struggling economy and would rather have them sold, even if at a price below the amount owed.

In less desirable areas of the city, up to 70 percent to 80 percent of homes on the market could be short-sold, said Vince Keller, who sells properties with Coldwell Banker Residential Brokerage in Lakeview.

Even in North Side neighborhoods like Wrigleyville and Uptown, “short sales play a big factor,” causing prices to fall and adding lengthy paperwork to transactions, he said.

Short-sold properties are not included among foreclosure totals, which measure the notices of pending foreclosures, public auctions and the properties taken over by banks, called real estate-owned properties or REOs.

In Daley’s plan to address foreclosures, Mercy Portfolio Studios, a division of nonprofit Mercy Housing Inc., will buy REOs from financial institutions and coordinate their redevelopment. Funding for the project comes from the nonprofit MacArthur Foundation, Bank of America, Citigroup and Living Cities Inc., a partnership of philanthropies and financial institutions.

Foreclosure numbers are expected to rise in 2009 as the recession leaves more homeowners jobless and in tough financial situations.

“I think it’s going to get worse before it gets better,” said Shara Winfield, director of the Chicago Association of Realtors. “It means that Realtors are charged even more to educate. We encourage people to make decisions based on family needs and understand why things are happening.”

The City of Chicago will also continue its efforts to prevent foreclosures. Residents can call 311 to get free advice from an accredited housing counselor.