People who say that the proposed $25 billion foreclosure settlement between states and five major lenders is near are perilously close to the boy who cried wolf, but this time a resolution may actually be near.

The question now becomes this: If/when this settlement passes, will homeowners receive any significant benefit?

On the surface, the question is a bit silly. One would expect homeowners to receive some kind of restitution for being wrongfully foreclosed on by banks like Bank of America, Citibank, Wells Fargo, JPMorgan Chase, and Ally Financial. Previous versions of the settlement, though, did little to assuage the doubts of consumer advocates – including several high-powered attorneys general involved in the negotiations.

The latest incarnation of the settlement does provide for some monetary compensation for homeowners who suffered as a result of the banks’ alleged practices, but former owners of home foreclosures will not get their homes back.

Of the $25 billion, approximately 68% of the amount – $17 billion – will be allocated toward principal reduction to help owners of distressed properties and underwater homes. Roughly 20% of the amount – $5 billion – will be targeted toward state and federal programs that include a provision to give roughly 750,000 Americans checks worth $1,800 apiece. The remaining amount – $3 billion, or 12% – will go toward assisting homeowners with refinancing their mortgage loans at a lower interest rate around 5.25% – higher than today’s incredibly low rates but lower than most of the interest rates for today’s outstanding loans.

There could also be measures of reform contained in the bill, but one of the most contentious measures – civil immunity for banks – is still very much on the table and a real possibility. Limited criminal immunity may also be included, but banks will be vulnerable to some legal action by the states. Already several states have promised to initiate investigations into faulty foreclosure processes, including Delaware, New York, and Massachusetts.

In the end, if the settlement passes, nearly a million Americans could see a $20,000 reduction in their principal balances on their loans. That will help some homeowners, but large swathes of underwater and distressed homeowners will not receive any benefit from the settlement.

Since this is an election year, the Obama administration will likely pressure all sides to make this latest itineration of the settlement the final one. Even if states decide to not sign the agreement, it will likely pass – still leaving the door open for major legal battles down the road.

The short answer? Probably. The long answer? Probably – but it depends. Let’s take a deeper look at the question and the potential answers for homebuyers and investors alike.

The real estate market has been unstable and uncertain for most of the past five years. Prices have continued to fall throughout most of the nation, and supply has far outstripped demand and kept already-depressed prices low. Furthermore, lending has been virtually absent, and the sheer number of foreclosures heading to the market in the near future has caused many real estate investors and homebuyers to think twice before pulling the trigger.

We will take a look at three distinct groups of potential buyers to see if now is the time to buy – or if one is better off waiting for a better opportunity.

Homebuyers Looking to Buy a Home

This is the largest group of real estate buyers by numbers, and traditionally has carried the vast majority of real estate activity. They look for homes they can afford in good neighborhoods with an emphasis on living over profitability. In other words, they are not particularly interested in whether or not the home will earn money in the long run, and care about the rise and fall of property values only to the point of wanting to avoid being severely underwater for an extended period of time.

For these buyers, now is definitely the time to buy. Interest rates are at an all-time low. Supply is through the roof and home prices are down across most of the country. In fact, some areas are starting to pick back up – which means buying now is as close to the bottom of the market as you can expect to get. Pick a good neighborhood next to good schools and good job opportunities and with the right amount of homework, you can find a quality home at a discount.

Investors Looking to Buy Property

This second group is probably the most active, due to the sheer amount of foreclosures and other distressed properties on the market today. In most cases, now is a great time to buy, for many of the same reasons as the above group. Interest rates are low, and so are home prices. But, for those looking to flip, uncertainty is still present to a degree that makes blindly pulling the trigger a mistake.

Investors who want to buy properties and hold them for mid to long-term profit, or want to operate them as rental units, are in a great position and can lock in significant discounts through foreclosures and other distressed properties. Now is probably the time to buy, although in some states, like Florida, California, Arizona, and Nevada, more foreclosures will result in lower prices for the short-term.

Investors Looking to Buy REITs

Real estate investment trusts, or REITs, form a third way to get into the real estate game. It’s not the same as buying property, but these securities are based on real property holdings, so there is an indirect correlation. Investors who do not want to actually purchase properties and/or manage them can instead “own” them by proxy and profit off of their underlying value.

REITs have been hot commodities lately, and while they have cooled off somewhat, they still offer a good way to diversify a portfolio and generate income. Plus, some REITs are dropping in value, especially after “Operation Twist”, so now could be a good time to find bargains.

In all three cases, now is a great time to buy for most buyers out there. Waiting a bit may result in better gains, though, so each potential buyer should do the legwork and look for specific details relevant to his or her geographic location.

Foreclosure rates have been up and down, here and there, over the past five years. For the most part, they were up – steadily increasing year after year as waves of foreclosures crashed down onto the market. Housing prices have dropped, and foreclosure inventory all over the country has grown dramatically.

With all that being said, it’s possible we may have reached a foreclosure peak and are now on the back side of the latest wave.

Numbers released today seem to indicate that the foreclosure rate is cresting a bit from the five-year ride. Fewer homes are being foreclosed, which is a good sign (even though foreclosure inventory remains high).For example, just 8% of mortgages in the U.S. are delinquent – down from 16% at this point last year. And only 8% of mortgages are seriously delinquent or in default, also down from 11% this time last year.

This is news that foreclosure rates may be on their way down in the long term. But, there is still the problem of foreclosure inventory.

Somewhere in the neighborhood of 4.2 million mortgages are either in the foreclosure process or are in default. This almost matches the number of homes – 4 million – that have been sold at foreclosure auctions since 2006.

Loan modification programs have helped stem the tide, as have higher-quality loans and revamped foreclosure processes by lenders. Still, such a massive backlog, we suspect, will prolong the housing crisis and keep prices depressed in many areas of the country for some time. At current rates of buying, it could take 3-4 years to clear out the backlog.

What this means is that even though foreclosures are steadily decreasing (albeit at a glacial pace sometimes), prices will remain low and inventory will remain high – resulting in great buying opportunities for some time to come.

Many investors and homeowners alike have a keen eye focused on the housing market to determine its current status and gauge whether or not progress is occurring. Daily news and blogs provide a glimpse of hope for those in the real estate arena as reports of declining foreclosure rates continues to surface. Moreover, the nation’s capital is showing true signs of growth in the housing arena that will hopefully spread to the rest of the country in the near future.

Amidst an increasing foreclosure inventory for most of the nation, Washington D.C. is showing incredible signs of growth and progress as many open houses actually end with a purchase—something that is not occurring in many other parts of the country. Not only are homes being sold, but housing prices are also increasing in D.C. What makes D.C. different from other parts of the country? Jobs and prospective buyers.

D.C. is known as a hot spot for jobs ranging from major businesses to political headquarters. The capital has reached employment stability which has directly affected the housing market. Not only are home prices on the rise, but residents are able to find jobs and therefore secure loans for home purchases. Furthermore, the area’s home foreclosure rate is incredibly low in comparison to many other places in the country—again, due to employment stability.

Hopefully, the decline in the unemployment rate and gains in the real estate market is something that will start to spread across the nation as the economy slowly bounces back. What is occurring in the nation’s capital shows us that the unemployment rate and housing market are directly related. Therefore, one of the only ways to achieve a complete real estate market recovery is to increase jobs, thus decreasing unemployment. People want to purchase homes, especially with the incredible deals they can find on foreclosure properties; however, stable employment is the key to expanding this amazing D.C. news to the remainder of the country.

Statistics don’t lie. They are a dependable source, so whenever possible, we like following the latest statistics for the real estate market across the country to identify trends and see where the market is headed.

Today, new numbers came out that revealed a pretty interesting picture of the foreclosure market throughout the country. The foreclosed home sales dropped 16% from the last three months of 2010 and fell 36% from a year ago today. Although there is a decline in sales in comparison to last year, there is a 27 percent increase since the first quarter of 2010.

The lingering inventory has been one of the factors behind home prices that are still entirely too low for a healthy market. As long as the inventory remains high and stocked with distressed properties, home values in most areas of the country will continue to remain depressed.

Foreclosed homes also made up 28% of all residential home sales so far in 2011. But, at this pace, with decreased sales volume, experts predict it could take three years to clear out the foreclosure inventory – and that’s assuming that new foreclosures aren’t added to the markets in droves.

The housing market won’t really prosper again until the massive backlog is dealt with – and that involves people buying foreclosed homes at steep discounts. It also means that in desperation, banks with excessive properties on their books will accept even less for the home – resulting in more savings for you if you choose to buy.

All in all, the buyer’s market in real estate and in foreclosed homes is still going strong. Prices will certainly fall further in many places across the country. Taking advantage now could be the first step in a fruitful investment strategy.

One state we look at is the sale of existing homes, which reveals a portion of overall buying activity – which in turn drives the housing market and a major part of the economy. Existing home sales for April fell by 0.8% according to the National Association of Realtors, which is a really small decrease but a decrease nonetheless. Leading analysts say 6 million homes sold per year is a healthy level, but this year is expected to produce just 5.05 million units.

Foreclosure sales is another indicator. Heavy foreclosure sales and high rates means that investors and homebuyers are lured to the discounts available and the high surplus of inventory, which keeps them from buying more expensive homes or building new ones. All of this dampers the economy, so we want to see foreclosure rates as low as possible. They actually fell by 3% in April, and are now down to 37% of all home sale purchases – which is still pretty high. 

We expect this trend to, on the whole, stay stable for the time being. We don’t think there’s a chance that we’ll hit 6 million sold homes this year, but any improvement above the past couple of years is a good sign. Plus, with slower foreclosure filing times, we have a chance to reduce the foreclosure inventory surplus a bit and improve prices.

The number of foreclosure homes in Charlotte and repossessed properties in other metropolitan areas of North Carolina dropped during the period January-March 2011. For the whole state, a total of 8,178 properties received foreclosure-related filings during the three-month period. The total represents a decline of 12 compared with the 2010 first quarter. When compared with the previous quarter of October-December 2010, the drop was 27%.

The level of North Carolina foreclosures for the current year's first quarter put the state at number 36 among U.S. states with the highest number of foreclosures for the period. Data showed that one household for every 521 residential units received a filing in North Carolina during the first quarter. The foreclosure rate of the region was better than the nationwide ratio of one foreclosure for every 191 housing units and the foreclosure rate of Nevada which remained the top state in terms of foreclosure numbers. Nevada has one household receiving a filing during the period for every 35 residential units.

Figures used in determining home foreclosure rates during the first quarter included notices of default, properties scheduled for foreclosure auctions and bank repossessed homes. Nationwide, a total of 681,153 properties received a filing during the three-month period, representing a decrease of 27% compared with the 2010 first quarter. The total also translates to a 15% drop when compared with the 2010 fourth quarter.

According to housing market analysts, the drop in the number of real estate foreclosures in the whole country has more to do with slow processing rather than an improving housing industry. They stated that the documentation controversy that emerged during the latter part of 2010 has resulted in lenders taking their time processing distressed properties, while some were forced to review and re-file foreclosure cases. For the rest of 2011, analysts are predicting that foreclosure numbers will continue to rise.

Home foreclosure rates are projected to increase again, not only in North Carolina, but in the rest of the U.S. Housing experts claimed that the foreclosure problem will remain serious for the rest of 2011, much like the level of distress experienced by the housing market last year.

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According to economists, when North Las Vegas foreclosures and foreclosed property numbers in various local areas started hitting record levels, the population in Nevada has also started to decline. They stated that one of the reasons for people's decision to move out is the high foreclosure rate which has depressed property values and decimated the area's housing market.

Aside from foreclosures, lack of jobs also forced residents to move elsewhere and look for employment. Nevada's unemployment rate currently stands at 14.3% which is the highest in the whole United States. According to economists, most people have moved to Nevada to get good jobs and to enjoy the good life. However, once these perks started disappearing in 2007 and things got worse in the succeeding years, they decided to escape the difficult economic condition in the region.

Demographers have reported that ever since the national foreclosed homes rate started climbing to its highest level in decades, residents started moving out of the state. Over 90,000 residents have reportedly left Nevada since July of 2008. The decline in population is expected to get worse in 2011 and demographers have stated that it is as bad as it appears given that the state is the top growing region in the U.S. for the past two decades prior to the housing industry bust in 2007.

In addition to the thousands who have left, Nevada also reportedly suffers from a considerable decline in birthrate, a scenario that is common during economic downturns. Nevada foreclosures also continue to top the whole country in terms of total numbers.

According to local housing observers, most of the abandoned housing units in the state were constructed during the housing boom when speculators consider Nevada as a place with endless potential for growth. When the national foreclosed homes rate started surging, these speculators walked away and created a hole in the state's housing market.

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Residential property investors and buyers have stated that Colorado Springs foreclosure listings and distressed properties being offered at auction in various areas of the state have dwindled and most buyers are looking forward to the end of the moratorium. Bank of America has already lifted the sales suspension in 23 states where courts are required to approve foreclosure proceedings, which means that Colorado is not included in these states.

However, buyers of Colorado foreclosed homes expect the sales of distressed properties to resume in a few weeks. They are also optimistic that the foreclosure documentation controversy will not harm the foreclosure buying and selling market of Georgia.

Meanwhile, trustees at Georgia auctions have expressed confidence that properties sold in the state do not have the same documentation problems found in other areas. However, they did admit that the decline in the rate of foreclosed homes entering the auction block will mean that public trustees might have to deal with backlogs in the coming months.

They also admitted that any delay in the sale of homes from foreclosure listings will result in slower recovery for the state's housing market. One good thing about the moratorium though, is that it could improve residential property values in Georgia, albeit only for a short time, market analysts have stated.

In 2009, over 7,000 foreclosed homes were auctioned off during the period January-October in various counties of Georgia. Over 1,000 of those on offer were sold to third party buyers, with the rest of the properties reverting back to lenders and banks. So far in 2010, 12,172 foreclosure properties have been auctioned off by public trustees, with 1,525 ending in the hands of third party buyers.

Trustees have reported that the rate of foreclosed homes being auctioned off during the first half of 2010 was considerably higher compared with the latter part of the current year. They also reported that fewer bidders are attending auctions following the implementation of the moratorium.

Although the number of Chicago foreclosure homes for sale and distressed property totals in other areas of the state had never reached uncontrollable levels, the surge this year has been noticeable, with some analysts fearing that this could be a start of some bigger housing market trouble.

One sign that the number of Illinois foreclosure homes for sale has been going up can be seen in the county of Champaign. Sheriff's sales featuring foreclosed properties in the area were regularly held at the courthouse lobby. Lately, such auctions are held at Lincoln Room, a more spacious venue that can accommodate increasing number of auction attendees interested in witnessing higher than usual property auction sales.

Local real estate lawyers have also noticed the increase in home foreclosure rates in several areas of the state and have stated that, although predatory lending can be considered over, its impact on the housing market seems to be just starting in some areas.

Market analysts have added that the surge also creates a more unstable economy, with areas like Champaign and Urbana more likely to feel the pressure of a business closure, even by a single company. However, other market observers believe that the increase in the number of homes falling under a foreclosure property listing has more to do with the recession and job losses than on predatory lending.

In Champaign, 355 chancery cases, or those involving homeowners who are at least 90 days behind in their mortgage loan payments, have been filed in the current year so far. The figure is on track to beat previous year's whole-year total of 494. In Vermilion County, chancery cases filed are at 272 for 2010, while previous year's total was at 341.

Home foreclosure rates in areas like Champaign-Urbana was pegged at 1.38% in June 2010, representing a rise of 0.93% when compared with June 2009. However, most analysts find optimism in the fact that it is lower than the national average of 3.06%.

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