It is that time of the year when reports are coming out that discuss everything from the number of homes sold in 2011 to foreclosure filings. All eyes are on these reports to see if real estate market progress is occurring or if the market remains stagnant.

What, exactly, did foreclosures look like in 2011 in comparison to previous years?

A recent report revealed that there were almost 1.9 million foreclosure filings in 2011, including everything from notices of default to repossessions and auctions. At first sight, the 1.9 figure can seem incredibly high; however, it is actually significantly lower than the numbers over the last 3 years. Specifically, 1.9 million is 34% lower than 2010 and 33% in 2009; therefore, these numbers reveal that real estate market progress is being made.

When looking at the nearly 1.9 million, how many of these homes were REO properties? According the report, there were just over 800,000 REO homes put back on the lender’s books.

What is an REO Property?

A REO property is also known as a real estate owned property. These homes are reacquired by the lenders when they are not purchased at foreclosure auctions. More often than not, the lender (normally a bank or government agency) obtains the property because the home is far less than the amount owed on the loan. As a result, nobody purchases the property at auction which returns it to the lender. These REO properties are considered non-performing assets (or a loan that remains past due).

It is not shocking to see 800,000 REO homes in the report considering that a sky-high foreclosure inventory has led to a drastic reduction in home prices. When home prices fall below market value and outstanding loans are significantly higher than the value of the home, many people abandon their properties. When sending these homes to foreclosure auctions, many people are still unwilling to purchase the property for the loan settlement amount. Therefore, the home goes back to the lender and is categorized as a REO property.

REOs and Flipping Houses

Another piece of news could make 800,000 REO homes on the market even more attractive.

Today it was announced that the Federal Housing Administration (FHA) was renewing its permission to flip homes, in essence allowing investors to take out home loans guaranteed by FHA for the purpose of buying homes, renovating them, and selling them less than 90 days after the initial purchase amount. Previously this was not allowed until the FHA decided otherwise last year.

With 800,000 REO homes on the market in 2011, plus renewed permission from the FHA for house-flipping, investors could see a very opportunistic 2012.

As anyone who is following America’s real estate industry and housing market knows, current existing housing inventory is sky high. Even though housing inventory has fallen for the past four months – August saw a 1.9% decrease from July – approximately 2.2 million homes are still in the foreclosure pipeline, with an estimated $12.09 billion worth of REO properties in the inventory. That works out to roughly 540,000 REO homes in the country owned by an assortment of entities, from the federal government to credit unions, banks, and finance companies.

The market is impacted significantly by this high inventory load because the excess of supply continues to suppress prices in the market and freeze buyers and sellers alike, mainly due to uncertainty regarding the direction the market will take in the near future. As a result, in order to move back to a healthy housing market, existing inventory – including REO homes that failed to sell at auction – needs to be reduced as much as possible.

But how?

The federal government has been dealing with this exact question for months, attempting to develop a solution that will help gradually release these homes onto the market to relieve pressure on housing values without causing an excessive glut of supply- which would only send prices spiking downwards.

One solution inevitably must involve greater access to credit for qualified buyers so they can buy REO homes. There are two obstacles to overcome. With a few exceptions, the federal government cannot force lenders to lend, not without major ramifications and a complete restructuring of our nation’s economy. Additionally, finding qualified buyers is hard because lending requirements have been tightened – mainly as a response to the loose and easy credit that helped fuel the housing bubble that resulted in this mess to begin with.

There needs to be a balance between the two extremes that allows for more lending to a wider variety of clientele without risking opening the faucet entirely to anyone and everyone. The federal government can support this by providing liquidity and backing to commercial lenders with taxpayer dollars. It won’t be cheap, though, and deficit hawks in Congress might object.

Another solution is to also facilitate loan modifications and short sales. This will not directly reduce the existing inventory – i.e. homes that are already REO properties – but will help to keep the inventory from growing by cutting the number of homes that are foreclosed on. If this action is supplemented by tax credits or other incentives for purchasing REO homes – potentially by loosening the requirements for a 203(k) rehab program loan from HUD – inventory could shrink and not grow any further.

Any solution will cost money, either outright or through reduced revenue from tax credits, but something must be done to jumpstart the housing market and finance a housing recovery, since the private sector is unwilling or incapable of doing so at the moment.

The housing market has been like a rollercoaster – up, then down, over and over again. But, over the past few years it has been more like the world’s tallest rollercoaster: mostly down, with a drop that seems to go on and on.

Across the country, most areas are still seeing declining home values and more foreclosures, with stability nowhere to be found. Foreclosures continue to be added to the market, including REO homes – homes that didn’t sell at foreclosure and are now owned outright by banks.

It’s true that these additions to the foreclosure market make for great bargains and discounts. But, it may also be true that some areas of the country are experiencing some price stability for the first time in years.

The Sacramento area in California, for example, saw a drop in the REO saturation rate from 45% to 44%. That may not seem like a lot, but for any area in California, any drop of any kind is great news. After all, fewer REOs in an area mean that home values can start to increase, which is good considering prices have collapsed by 60% in the area since 2005.

By contrast, other areas – like the metropolitan Fulton County area in Atlanta, Georgia – are continuing to slide. Things are so bad over there that Fulton County commissioners are holding foreclosure prevention fairs for homeowners who have been negatively impacted by the market slide. Fulton County continues to have one of the highest foreclosure rates in the state.

Stability, for now, seems to be a fleeting thing and one confined to just a few areas in the country. The national home value average continues to fall, but if you look hard enough, you can find a few regions with stable prices. Either way, now is the time to take advantage of these steep discounts and find investment vehicles that perform.

There are a lot of low-priced Bronx foreclosed homes and distressed New York houses to choose from, but majority of home hunters in New York City seemed to be more willing to become tenants than homeowners as the region tops the whole U.S. in terms of rental housing occupancy. New York City was number one among all metro areas in the country, with a rental home vacancy rate of 2.4%.

The rate of vacancy in the rental market of the metro area is notable, given that there are thousands of New York foreclosures being offered at almost half their original prices. The strong status of the New York City rental market mirrors the national market's condition, with nationwide rental vacancy pegged at 9.4% as of the last quarter of 2010, the latest complete data available for the nation's rental housing industry. Housing market analysts reported that the percentage represented a decline of 1.3% from one year ago and also represented the lowest vacancy rate in the U.S. rental market since the first three months of 2003.

Housing experts have stated that more Americans are foregoing bargain-priced foreclosures and REO homes in favor of apartments and rental houses as the year progresses. They revealed that a lot of former homeowners who have lost their houses to foreclosures have become renters, with most of them unqualified to purchase a home right after a foreclosure.

In addition, analysts stated that the fact that a lot of people are ignoring heavily discounted properties in list of foreclosed homes in favor of apartments showed that the idea of owning a house as part of the American dream has changed, with people becoming more attuned to the true condition of the residential property market. Analysts also reported that, for the most part, areas with high levels of foreclosures are the ones that posted the highest increases in the number of renters.

Housing industry experts are expecting rental housing to continue to thrive in the coming months, despite foreclosures and REO homes remaining affordable in most markets. They also stated that rental rates are likely to rise soon, particularly in areas where demand is quickly outpacing supply.

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The third quarter of the current year saw most home buyers and investors staying away from Rockford foreclosure homes and distressed properties markets in various parts of the state as demand for such residences plummeted. For the quarter in focus, a total of 6,844 foreclosures in Illinois were purchased by buyers. This represents a decline of 24.34% compared with the 2010 second quarter.

For those who did purchase Illinois foreclosed properties during the 2010 third quarter, majority were able to pick a discount of over 40%. The average price of foreclosed dwellings for the quarter was $142,214, a price that is 41.34% cheaper than non-foreclosure residential properties. Although both prices and total sales showed poor numbers during the period, foreclosures still accounted for 24% of all home buying transactions in the state.

According to housing market analysts, waning buyer interest in REO foreclosed properties and other distressed real estate is mainly caused by the controversial investigation into lenders' foreclosure documentation procedures. They stated that, with lenders' processing of foreclosures being put under scrutiny, most buyers and real estate investors became wary of purchasing foreclosures for fear of not getting a clean title.

As demand for foreclosure houses for sale continues to decline, analysts expect prices to drop even further. They reported that the biggest price discounts are seen in properties offered through short sales and in bank owned residential properties. Nationally, prices for such residences in the third quarter were 32% lower than the average price of non-foreclosure housing units.

They also reported that the 2010 third quarter recorded the biggest discount in foreclosure prices since the 2005 fourth quarter. Also, the quarter recorded one foreclosure out of every four housing units sold all over the U.S. Analysts predict that the trend will likely continue until the early part of 2011 at least, when REO foreclosed properties and other types of foreclosures will continue to account for a large percentage of total residential sales, but being sold at heavily discounted rates.

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Ogden home foreclosures and all types of distressed properties in almost all areas of the state rose during the period, with one household out of every 88 receiving a filing for the third quarter. The state recorded a total of 3,700 properties lost to foreclosure for the July-September period.

According to housing market analysts, the significant jump in Utah foreclosed homes total can be attributed to the record number of bank repossessions posted all around the U.S. during the quarter. The state's real estate market also experienced the crisis almost two years after every state in the U.S. is already mired in it, which means that Utah is just starting to experience the worst of the problem.

The house foreclosure problem is expected to start easing in the state by early 2011, when the local residential market will start bottoming out. While other states' housing markets have already started bottoming out during the early or middle part of 2011, Utah will just be starting to reach the lowest level by next year.

Other factors cited by housing market analysts behind the rise in the number of REO foreclosures and distressed properties in the state are high unemployment rates and declining prices of houses. According to them, when values of dwellings decline, a big number of homeowners ended up owing more on their loans than what their properties are worth.

Local housing data revealed that around 25% of Salt Lake homeowners are underwater or paying mortgages at a higher price than their houses' worth. The rest of Utah is also suffering from similar problems, although it is anticipated by most market observers that the foreclosure rate will decline in the fourth quarter of 2010 as the nationwide moratorium impacts housing markets all around the U.S.

Based on total number of foreclosure filings and REO foreclosures for the 2010 third quarter, there are only five states that have worse housing market conditions than Utah and these are Nevada, Arizona, Florida, California and Idaho.

Locally, foreclosed homes in Queens, NY have declined in number for the first time – along with the rest of most metro areas in the U.S. – since 2006. Data from the Mortgage Bankers Association showed that the second quarter of 2010 recorded the lowest foreclosure totals since four years ago.

Reports on the housing market have also shown that majority of New York foreclosed homes and foreclosed properties in other parts of the U.S. are not the products of subprime loans gone bad anymore, but are mostly related with prime mortgage loans that ended in default due to the high rates of unemployment.

The number of foreclosed homes all over the country is expected to continue rising for the rest of 2010 as mortgages that are past their due dates for at least three months have posted a 9.11% record for the second quarter of the current year. Although this is lower than the first quarter's 9.54%, it is still considered high and very near the 2009 fourth quarter peak of 9.67%.

Another factor that provides a glimpse of a negative future for the housing market is the fact that buyers are not too interested in plucking out REO foreclosures for sale and existing dwellings from the market. Existing home sales dropped by 26% in July 2010 compared with July 2009. When it comes to sale of newly built residences, the decline for July 2010 is 32% when compared with July 2009.

The current year's July figure for new home sales is the lowest ever recorded for the month since 1963 and represents a weaker than expected sales market. The poor sales numbers for the month are being seen by most analysts as a sign that home prices will drop further in the coming second half.

Analysts have also added that four million REO foreclosures for sale and other foreclosed properties are expected to be added to the total number of troubled residential properties in the country before the year ends.

The event was organized by the Sound Alliance in an effort to help troubled homeowners and to improve the condition of Kent foreclosure investing and the general housing market. The alliance is a coalition comprise of labor unions, community groups and churches. It organized the event in collaboration with the Urban League of Metropolitan Seattle.

The event will feature loan officers from Bank of America and Chase and housing industry counselors who will discuss various issues related to Washington foreclosed homes for sale and other housing concerns with customers. According to the organizers of the event, the meeting was established in response to homeowners' complaints regarding how difficult it is to get in touch with lending officers from banks like Chase and BoA.

The two lending institutions, which also offer REO houses for sale, will be sending loan officials to the event to talk individually with borrowers in an effort to possibly start loan modification efforts that might save homeowners' residential properties. Such efforts are reportedly patterned after the Troubled Asset Relief Program used by the federal government to bail out banks during the height of the crisis.

Aside from organizing the event that will focus on issues related to buying homes for sale, the Sound Alliance also requested Bank of America to establish an office that will provide assistance to homeowners in the region of Puget Sound. According to the organization, having a BoA customer office in the region will go a long way towards providing mortgage holders with a venue where they can get help resolving their loan modification concerns.

Reports reveal that Chase bank already has such a center in the region following its acquisition of Washington Mutual. Meanwhile, organizers are hopeful that the event will prove to be a success and more lenders and REO houses for sale specialists will come to the area to conduct similar meetings.

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The hotels reportedly became Fresno pre foreclosures due to unpaid loans worth $27 million. The lawsuit was filed by Far East at the Fresno County Superior Court, seeking foreclosure proceedings against three of the hotels under the Piccadilly name. According to reports, the bank initially provided three loans to the owners of the hotels in March 2007 totaling $28.7 million.

The loans were reportedly provided to the owners of the Airport Piccadilly Inn, the Piccadilly Inn in West Shaw Avenue and the Piccadilly Inn Express. With the area already suffering from a high number of California pre foreclosure homes, local housing market observers are not savoring the idea of having the three hotels under foreclosure.

In California, REO properties for sale are not just residential structures, commercial buildings, hotels and other real estate properties have also come into the foreclosure market because of owners' failure to pay their mortgages. In the case of Piccadilly, Far East has claimed in court documents that the owners have not made any loan payment since November of last year.

The possibility that the three hotels will end up foreclosed is not something new in the state which has seen huge numbers of foreclosure houses for sale coming into the market almost every month. However, a possible foreclosure in this case is expected to have a significant impact on the commercial real estate of the area.

Far East lawyers have also filed court documents stating that the mortgages were deeds of trust-secured. They also accused the owners of the properties of breaching agreement that clearly specified the need to pay the loans. The bank's lawyers have requested that a receiver be appointed for the hotels.

Whether the hotels will end up as REO properties for sale will be known to the California real estate industry in the coming months as a lawsuit has already been filed on the court by Far East National Bank.

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The HUD auditors said that the SHRA was supposed to buy foreclosure houses in neighborhoods hardest hit by the crisis, but the local agency instead spent over $1.1 million in making expensive repairs on properties that were not foreclosed or abandoned at the time frame specified by HUD.

In addition, the SHRA also allowed the contractor, EPO Development, to spend for expensive and unnecessary upgrades on 16 multifamily properties at Lerwick Road and at Arcade Circle. The auditors claimed that the developer earned 20 percent from the multifamily contract, much higher than the average earned by other contractors for similar projects, which is around 9.6 percent.

The money spent on the EPO contract was part of the $18.6 million allocated to Sacramento County to rehabilitate REO homes for sale or abandoned houses under the Neighborhood Stabilization Program. All in all, the SHRA allocated $3.8 million that could have been spent on more pressing projects.

Based on recent reports from a major research firm, foreclosure filings in Sacramento area declined in May, but the rate of mortgage defaults increased and the number of foreclosed homes available for people in Sacramento foreclosure investing is still high.

On one popular real estate site, there are currently 22,434 foreclosed properties for sale, with the two properties on its front page priced at $136,947 and $115,474, far below the current average price in the area which is around $193,000.

Investors can also still find cheap houses in California as the state still posted the highest number of foreclosure cases in May. Of the more than 72,000 homes that were notified of foreclosure in May, almost 16,000 were REO homes for sale.

Find more foreclosed homes in Sacramento, CA