There have been fears that, since lenders have reached a settlement with the federal government and U.S. state attorneys, they will be free to continue processing distressed properties which will then be dumped into foreclosure home lists. Most are concerned that this will bring another wave of housing crisis in the U.S.

However, a bigger percentage of housing analysts believe that this will not be the case, regardless of whether more foreclosures are dumped into the market or not. They argue that buyers have taken to picking up great bargains from foreclosure home listings and they will continue to do so, particularly when more options become available.

Prices Will Drop, but Market Will Hold Steady

Home prices are predicted to drop a further 10% in the coming months as more foreclosed homes enter the market. Analysts agree that prices will drop, but they assert that this will not bring another wave of foreclosure crisis. They argue that sales will also increase as supply expands and will help keep some semblance of balance in the market.

In addition, most housing experts believe that the entry of more foreclosures into the U.S. property market will actually be good for housing overall. They argue that the increased pace of processing means that the sector will work off inventory faster which, in turn, will help speed up recovery.

Lenders Remain Cautious

Moreover, analysts have observed that lenders, instead of speeding up processing as expected, are actually doing the opposite. Data showed that the number of foreclosures processed by banks in February 2012 actually declined by 15% from the previous month and was also down by 15% from a year earlier.

Most mortgage companies are more focused on completing sales, rather than on completing distressed property processes, they further added. Analysts believe that lenders have learned a lot from the recent housing crisis and are moving more cautiously, since they now know that they need to be careful in their procedures.

U.S. areas that have considerable shadow inventories will likely experience increases in the number of properties entering foreclosure listings in the coming months, analysts have predicted. Since courts and state governments have already dealt with processing issues, it is most likely that lenders will push more distressed properties into the market.

The recovery of the housing industry has been uneven for the most part. Because some metro areas will come from a deep bottom, the time they need to recover may be longer. Analysts expect the entry of these new distressed houses to affect the market, but not enough to herald a double-dip.

Housing Will Hold its Own

Experts believe that the recovery of the housing sector is at that point where a new wave of properties entering foreclosure home listings will not create another crisis. They admit that it may rattle some segments, but not enough to cause another major problem. They expect mortgage rates to rise in the second quarter as the nation's economy shows some growth.

Meanwhile, construction spending recorded a decline in February 2012, reflecting the impact of the expected increase in foreclosure numbers. The decline was pegged at 1.1%, marking the biggest drop in seven months. Despite the decline, construction is expected to pick up momentum as properties under shadow inventories are put in the open.

Influencing Factors Outside the U.S.

Housing experts have emphasized the need for the U.S. to maintain its positive economic numbers to offset possible negative influence from international markets. The problem in Europe is a major factor that can affect the status of the domestic housing industry, experts have claimed.

They believe that the extent of the economic problem in Europe, particularly in Spain, will have a huge bearing on whether mortgage rates will rise in the near future. These overseas factors are also projected to affect the overall economic growth of the U.S., although they believe that the domestic economy is in a better position to weather the impact compared with a year ago.

Houses under a foreclosure list are available at bargain prices, so it is not surprising that they attract a lot of offers. Americans are not the only buyers of bank owned and foreclosed homes though, but also foreign investors and overseas buyers looking for a vacation home in the U.S.

With so much interest in these cheap properties, it is to be expected that supply will start to dwindle. The drop in the supply of foreclosure houses is expected to initiate a bidding war in most in-demand areas, like Florida, California and Washington D.C.

Inventory of Distressed Properties Nearing New Lows

In areas like Silicon Valley San Francisco, Seattle and Miami, bidding wars are occurring as the inventory of homes for sale nears its lowest level in six years. Interest in properties under foreclosure home listings continues to rise as purchase contracts for previously owned residences rose by 14% in February 2012 compared with a year ago.

A considerable percentage of these contracts are accounted for by foreign buyers. Overseas home buyers and real estate investors purchased properties worth $41 billion during the 12-month period leading to March 2011 and this trend is expected to continue this year.

Main Motivations for Buyers

Aside from the low prices, buyers are also being drawn to foreclosures because of the diversity of the properties on offer. Gone are the days when distressed houses are solely associated with a two-bedroom, dilapidated, single family home. Now, some multimillion mansions in high-end neighborhoods are also being sold as bank owned properties.

This, of course, is good news for all buyers and property investors. And although these luxury homes are signs of how the crisis has hammered the housing sector, they are also opportunities for those who would not have been able to afford such a property before. Such great deals however, may not last long. The government is already stepping up efforts to help troubled homeowners and existing bargains are being quickly snatched by eager homebuyers.

Foreclosure home lists offer some of the best real estate bargains ever seen in the U.S. for decades. The affordability of these properties has led to significant changes in the types of investments shaping the real estate market today; not to mention the types of investors who are taking their chances in real estate.

The low prices of foreclosure listing properties have evened out the playing field in real estate investment, giving opportunities to nearly every type of investor and providing even non-traditional home buyers the chance to become property owners.

Who Are Buying Homes?

In the past, families usually account for the biggest percentage of home buyers in the U.S. Although family homebuyers are still aplenty, a lot of other buyers have come into the market who have never been traditionally considered as homeowners; such as single people and younger buyers who can be as young as teenagers.

The change in the characteristics of homeowners is the direct result of the low prices of homes, which most people can now easily afford. Even flipped properties are selling quickly, with young professionals being the most avid buyers.

New Types of Investments Emerging

The highly affordable properties are also opening new opportunities to investors. These days, real estate is not just about single family homes and typical residential properties, but also about rental dwellings, golf courses and other non-traditional investments. Rental properties, in particular, have risen in almost all parts of the country as investors take advantage of the high demand and the low rates of mortgages.

Meanwhile, investors with bigger capital are putting their money on golf courses. The prices of golf courses have gone down during the latter part of 2011, declining to a median rate of $3 million from around $4.6 million in 2006. This presents investors with a great opportunity of picking them up at low prices and taking advantage of the projected decline in the number of golf courses in the coming years.

Affordable properties at foreclosure home listings have presented independent and small-time investors the chance to earn considerable profits from their real estate investments. Before, the real estate market is mostly the exclusive playground of companies with big capital and considerable cash flow.

The recent foreclosure crisis, however, has made residential properties highly affordable, giving even the most unexpected investor the chance to earn healthy profits from the housing market. For the most part, this is good news for the housing sector.

Who are Investing?

Most real estate investors are confident that investing in cheap properties can give them healthy returns. This belief is largely manifested in the launch of several investment funds aimed mainly at the distressed property market. Meanwhile, independent investors are also taking advantage of opportunities, with the younger generation leading the pack.

People may not expect teenagers to become real estate investors, but it is happening now as a rising number of younger people use their savings to purchase properties from a foreclosure list to convert them into rental dwellings. Not only are these young people learning the ins and outs of business, they are also helping lower the inventory of distressed real estate in the country.

Experts Recommend Real Estate Investing

A large number of investment experts believe that the prices of homes right now present the best opportunity in real estate investing. Some have even suggested using retirement funds to take advantage of these opportunities, arguing that the housing market will never be as good as it is now for investors.

This may sound risky, but investment gurus know that prices will eventually rise, but demand for homes will never go out of fashion. For most of these real estate-savvy advisers, Nevada, California and Florida remain the best places to purchase foreclosures. Although Nevada's foreclosure starts have dwindled in February of this year, there are still a lot of bargain properties that can be had from the area, along with Florida and California.

One important lesson that the housing crisis has taught most Americans – there is a need to improve the rules governing foreclosure processing. Authorities are aware of this, hence the deeper scrutiny being given to the process.

A major concern for them is the delay in the procedure, something that authorities are addressing in an effort to get the foreclosed homes out of the pipeline and into the market. Proponents of the expedited process argue that it will be better for the housing sector as a whole if distressed properties are in foreclosure listings instead of lurking behind the shadow inventory.

The Simplified Process

Several states are now deliberating on a proposed expedited process which simplifies the whole procedure of foreclosure. Critics of the proposal argue that this will bring more pain to homeowners, but supporters of the overhauled process disagree.

They claim that the proposal actually keeps a balance between homeowners' rights and the need to clear the foreclosure backlog which is believed to be hindering the industry from a full recovery. Meanwhile, state courts are starting to work through their backlog of distressed property-related cases, with some finally making a decision on whether a particular foreclosure is valid or not.

Will the Simplified Process Hurt the Market?

There are more housing analysts who believe that simplifying the process of foreclosure is better. They argue that distressed properties are better off out in the open, where buyers and investors can make an offer for them or convert them into rental dwellings.

There is no point in holding off the process if properties are already in the last stages of foreclosure. The rise in the number of multimillion-dollar foreclosed homes demonstrates this, as majority of these properties were just held off from the market through delayed procedures. Now that most of these homes are in a foreclosure list, it may be easier for the housing industry to move on.

The great deals offered at foreclosure lists continue to spoil homebuyers for choices. This trend is expected to continue in 2012 as more foreclosed houses are unloaded into the market for home shoppers to consider.

Aside from their cheap prices, residential properties at foreclosure home listings are also varied and, therefore, can cater to nearly all tastes and preferences. The number of homes valued at least $1 million that are being offered as foreclosures has also increased, providing more luxurious opportunities to home hunters.

The Year of Home Buyers

The housing industry is expected to remain a buyer's market for the most part of 2012. This is great news for most homebuyers and real estate investors and may also be good for the industry in general. Unloading foreclosed properties into the market instead of holding them off will give the sector a better chance of achieving a recovery before the current year ends.

For the part of homebuyers, they can also expect more luxury houses to be available to them at prices that they can only dream of affording before. Housing data has shown that foreclosures among residences worth at least $1 million have escalated in the past two years.

Where Cheap Luxury Can Be Found

The entry of luxury homes into the distressed property market presents great opportunities to investors and homebuyers alike. This also helps speed up the process of "flushing" foreclosures out of the market, majority of which are buried in the shadow inventory.

Areas like California and Florida are the most likely to offer these bargain luxury homes, which is something positive as these are areas where most people like to shop for houses. In a related development, California is reportedly asking Fannie Mae and Freddie Mac to hold off foreclosures until principal reduction is fully analyzed. Whatever the outcome, it is a sure thing that homebuyers will be eyeing the properties offered in the state in the coming months.

Properties at foreclosure listings have become popular among independent home buyers and real estate investors. The low prices of these properties have attracted a lot of buyers, causing the housing inventory to shrink in most parts of the U.S.

A bigger percentage of real estate investors are purchasing properties from foreclosure home listings to convert them into apartments, resulting in the rental segment surging ahead of other types of real estate. But is the purchasing activity high enough to offset the inventory overflow?

Impact of Investors and Home Buyers

Judging from figures derived from the latter part of 2011, the answer is yes. Foreclosure filings have dwindled mainly because of moratoriums and legal obstacles, but figures also show that mortgage companies are completing REO and foreclosure sales faster than they are completing foreclosure processes.

The low prices and affordable mortgage rates are combining to fuel demand for various types of distressed real estate. Distressed condominiums, apartments and other types of real estate that can be converted into rental dwellings account for majority of the sales, according to housing figures from the last quarter of 2011.

Fear Over Another Surge

With these numbers in mind, most expect the inventory to be lower by the middle of the current year. However, some market observers have pointed out that the number of homeowners facing potential foreclosure is, again, rising. Mortgage delinquency is said to be on the surge once more, posting a 6% increase during the fourth quarter of 2011.

This can lead to further increases in foreclosure numbers in the coming months, but a lot of housing experts have asserted that buying activities will continue to thrive and will likely offset the impact of new entries into the foreclosure process. In addition, government-led programs are being put into place to assist homeowners facing potential mortgage troubles. This time, experts believe that these programs will make some difference as it is obvious that the country has learned from its past mistakes.

While some areas of the country continue to cut down their inventory of distressed dwellings, others are coming from a very deep bottom, causing their housing markets to move more slowly toward recovery. Some of the latter are also facing potential supply increases due to shadow inventories.

Areas Gaining Ground

Regions that are quicker at cutting down their foreclosure numbers are those that have more renters on hand as most investors who purchase from foreclosure home listings are focused on building rental dwellings. Demand for apartments has risen in various markets and most investors are very much aware of the opportunities that this trend offers.

Meanwhile, others are also recording higher home sales, although improvements may not be obvious given the number of distressed real estate that they need to unload. However, this does not mean that improvements are not happening in these areas.

The Long Climb from the Bottom

In areas like Nevada, California and Florida, signs of improvements seem to be non-existent. Nevada remains the state with the highest foreclosure rate in the country and analysts admit that it will take some time before the state recovers from the housing crisis.

In California and Florida, on the other hand, there have been signs of housing improvements, although not as obvious as in other regions, given the fact that these two states will be coming from a very deep housing bottom. In addition, both have some of the highest shadow inventories of foreclosures, which can further derail their road to recovery. Despite these not-so-bright figures, upward movements in the housing sector of both are being seen, although it will take some time before any improvement becomes obvious.

The U.S. government is reportedly considering a handful of programs designed to prevent more homeowners from losing their properties to foreclosure home listings. Foreclosure relief and bank accountability are just some of the issues touched upon by the proposals.

Although the housing industry is starting to stabilize, there is no denying that there are still a lot of homeowners that require some help. Whether new programs or an extension of existing ones will prove to be useful is another issue altogether.

Government Mulling Foreclosure Relief Effort

The U.S. administration is reportedly planning to expand its Home Affordable Modification Program until 2013 in an effort to help troubled homeowners avoid foreclosure. This government is said to be considering increasing the financial incentives for lenders to reduce at-risk homeowners' mortgage principal.

There is also another effort related to the housing industry, this time concerning banks. A multistate settlement focused on flawed foreclosure practices will reportedly only include cases that have something to do with documentation errors. This means that banks found to be involved in securities fraud and questionable loan origination actions will still be facing criminal liability.

What it Means for Homeowners

Homeowners facing mortgage troubles may benefit from the extension of the relief program since its focus is on lowering their monthly payments. As to the bank-related proposal, it may not be perfect, but one can be thankful that those who deliberately deceived will not be let off quite so easily.

Meanwhile, the number of new homeowners may yet increase during the year as more first time home buyers are expected to take advantage of the bargain houses under foreclosure listings that are being offered in the market. Industry observers believe that the cheap prices will attract more purchasers. And although mortgage rates showed an increase, they have remained near historic lows, which is something that most homebuyers have taken note of.