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In several areas of California, Arizona,Washington, D.C. and the Twin Cities metro area, a rising number of first-time homebuyers have been bidding against investors in buying bargain-priced homes included in foreclosure homes listings.

The so-called bidding wars were common only during housing booms, but in areas where many renters have been enticed by lower home prices, lower mortgage rates and the tax credit incentives to buy their first homes, they have been competing with real estate investors in bidding for bargain-priced but attractive homes listed in foreclosure listings.

In Sacramento, Prudential California Realty agent Cherie Hunt said her client competed against two investors to buy a three-bedroom house built in 2001. Hunt?s client won because she agreed to add $10,000 more to get to the winning price of $220,000, which is still much less than the $405,000 price of the house when it was bought in 2005.

In Santa Ana, southeast of the city of Los Angeles, Tamby Leonard said she has been looking and bidding for a home priced in the $300,000 range since January. She said good homes in foreclosure listings tend to be captured quickly by investors who have cash money. According to Altera Real Estate agent Ed Mixon, many first-time homebuyers are looking for houses in the $300,000 price range in Santa Ana.

Across the nation, home prices continue to drop as foreclosure listings get longer with added homes and as the lifting of foreclosure moratoriums show their effects on foreclosure listings.

Many housing markets, including New York City and South Florida, remain overloaded with bank foreclosure properties for sale.

This week, the Federal Housing Finance Agency announced that home prices across the country increased in February by 0.7 percent from January levels, but decreased by 6.5 percent from February 2008. The slight increase from January levels was largely due to increased sales from foreclosure listings in the West Coast.

Housing analysts expect housing markets in Washington, D.C. and California to recuperate faster than markets in areas overloaded with foreclosure listings, such as South Florida, which is battered with abandoned condos. Kenneth Rosen, head of the University of California?s Fisher Center for Real Estate, said New York?s housing market will take time to recover because of Wall Street?s collapse.

Housing analysts cite the affordability factor as one positive trend that arose from the foreclosure crisis. Nowadays, a family earning $52,800 can spend just one-fourth of the income for a home, a decrease from the 44 percent cut in the middle of 2006.

An increasing number of mortgage lenders have been choosing short sales over foreclosure listings because home prices have been falling rapidly anyway.

During the boom times, people who were unable to continue paying their mortgage loans due to job loss or serious illness sold their homes easily through foreclosure listings or through auctions to pay their loans. In the past several months, home prices have fallen so low they are not even enough to pay the balance of the mortgage loans.

Lenders have been considering short sales because they have realized that in many cases, they are losing more when they go through the process of foreclosure and selling the assets through foreclosure listings.

When lenders foreclosed, they undertake processes that include filing documents in court, sending notices, coordinating with property managers and selling through auctions or foreclosure listings. In addition to the costs of these procedures, the foreclosure process also takes time especially if the homeowners undertake legal maneuverings to delay the process and allow them to stay in the foreclosed properties for a longer time for free.

When lenders agree to a short sale, they agree to accept as full payment an amount lower than the mortgage loan balance. They lose in the process, but their potential losses in foreclosure could be bigger if the foreclosure process takes a long time and if their foreclosed properties stay in foreclosure listings for months or years.

According to Fair Issac Corp., handler of the FICO credit score, a short sale also damages an individual’s credit score, but not as much as foreclosures do. Borrowers also prefer short sales because they save their credit records and they save themselves from the pain of foreclosures and evictions.

Mark Pearce, deputy banking commissioner of North Carolina, said short sales across the country have soared by approximately 20 percent in the last six months. Pearce is one of banking officials running a nationwide foreclosure prevention organization collecting foreclosure and short sale information from mortgage servicers.

Additionally, David Knight, vice president of Wells Fargo’s mortgage servicing division in Fort Mill, said his bank’s short sales have tripled in the last 18 months especially in areas of Wells Fargo’s operations where job losses rose to unprecedented levels and where home prices fell from inflationary levels to bottom levels. These areas also had unprecedented numbers of properties that were thrown into foreclosure listings.

The tour bus strategy of marketing repo homes is now being replicated in Chattanooga. As foreclosed properties account for almost 45 percent of total home sales across the country, more and more real estate agents and brokers are shifting from selling new and non-foreclosed existing homes to selling repo homes and many of them are now using tour buses and vans as part of their marketing strategies.

In Chattanooga, ReMax broker Aaron Shipley has organized Deals on Wheels tours to bring prospective homebuyers to view dream homes and real estate investors to look at money-making opportunities in repo homes.

The repo homes represent broken dreams to the American families who lost them to foreclosures; but they also represent the fulfillment of dreams to first-time homebuyers who have saved money to buy their first homes at lower costs.

Mortgage lenders typically lose about $50,000 in every foreclosure that they file and complete, so they want to lessen their losses by selling their repo homes quickly at discounted prices to lessen their property management costs.

Real estate agents and homebuyers alike acknowledge that not all repo homes are profitable. Many of these foreclosed properties need costly repairs because they have been heavily vandalized. But for skilled investors and homebuyers, there are opportunities for savings and profits.

Real estate agent Brandi Thompson related she bought one of HUD repo homes in Chattanooga in 2008 for $86,000, which was later appraised at $139,000 because it included a big garage and a basement. After making some repairs, she now has a rental home that gives her monthly income.

According to foreclosure tracking firm RealtyTrac, foreclosure filings soared 81 percent in 2008 to 2.4 million units. The firm’s senior vice president Rick Sharga said he expects more foreclosures in 2009 due to the rising unemployment rate. Foreclosure and job loss studies have shown that one home foreclosure results from every 6 to 10 jobs lost. Sharga also said more repo homes will flood the market when lenders increase monthly mortgage payments in loans structured with low initial rates but high subsequent rates.

Chattanooga real estate broker Cindy Walker, division manager for Crye-Lieke Realtors, said more first-time homebuyers and investors are looking at repo homes and now buying homes because of the low prices, low mortgage rates and the tax credit of $8,000 offered to families buying homes for the first time.

Finally, the federal government has recognized the prevalence of scammers victimizing homeowners who fear their houses will become foreclosed homes if they do not hire companies specializing in foreclosure prevention.

Homes in foreclosure listings are considered to be great buys because they are cheaper than new and existing houses. The growing supply of foreclosed properties has greatly contributed to the drastic decline in housing prices.

Prices for new, existing and repo homes are expected to decline another 10 percent over the 27 percent drop experienced by the housing market since it peaked in 2006.

Once again, the foreclosure crisis took a bite on the housing market and this time, prices of homes in foreclosure listings bore the brunt of its attack.