In some areas of California, so many foreclosed homes are available to buy on the cheap that real estate agents are discouraging prospective sellers from even putting their houses on the market.

Perhaps the most extreme example of this is Stockton, about 85 miles east of San Francisco, where roughly three of every four homes for sale are in or on the path to foreclosure.

The city's resale market is "pretty much gone," said Cameron Pannabecker, owner of Cal-Pro Mortgage.

"I don't know an agent today who would take your listing unless you're a hard-luck case. There is just too much competition," Pannabecker said.

Properties that at the peak of the market two years ago were selling at $500,000, or appraised at $500,000, are now selling for $200,000, he said.

And because foreclosures dot all areas of Stockton, buyers have their pick of properties, said John Knight, a professor of finance and real estate at Stockton's University of the Pacific Eberhardt School of Business.

"Honestly, there isn't a huge amount of difference between a foreclosed home and a regular home than the prices," Knight said.

May Last for Months

Worse for people trying to sell their homes, lenders in possession of houses and condominiums may keep their fire-sale in full swing for months to come to attract investors to a market near the top of U.S. surveys of areas hit by foreclosures.

"It's a tough market to be a normal seller," said Stockton real estate agent Michael Blower of Blower Realtors.

"I'll really ask them, 'Do you need to sell?' Because your competition are banks who want to clean it off their books."

Calling up listings on a database, Blower noted just over 3,500 of nearly 5,000 local homes listed for sale are in some stage of foreclosure. "There are more listings coming," he added.

More listings would add pressure on local home prices. But they may only hold prices down rather than drag them lower because investors are slowly coming to Stockton in search of bargains, and in some cases they are in bidding wars, albeit at comparatively low prices.

"We heard yesterday there were 36 offers on one house," said Terry Hull Sr., a veteran Stockton property manager and owner of property management company W.T. Hull. Hull said he, too, may soon put offers on local properties because they have become so cheap: "We're going to buy about 50 houses because we know it's an opportunity you rarely see."

Stockton's home prices surged earlier this decade amid a building boom seizing on skyrocketing prices in the San Francisco Bay area displacing middle-class buyers. Many headed to Stockton, historically a sleepy agricultural distribution center, and neighboring towns more than hour's driving commute east.

Routine home financing, as in many other markets, was in the form of risky adjustable-rate mortgages. When low interest rates reset, many of those mortgages became too expensive to maintain, triggering a wave of defaults and foreclosures.

The Renting Option

Distressed borrowers who manage to sell their houses are in many cases able to rent equivalent properties for about half the cost of their monthly mortgage payments.

"I don't know of anybody who has been foreclosed who is moving into an apartment," said Paul Jacobson, an associate at W.T. Hull.

Investors have taken notice that rental demand in Stockton is on the upswing while home prices have fallen, providing an opportunity to turn foreclosures into profits, said Cesar Dias, a Stockton real estate agent who arranges bus tours of foreclosed properties.

Dias said one foreclosed home he showed last month sold for $80,000, or $11,000 above its asking price, after 12 days on the market. The two-bedroom, one-bathroom house may rent for up to $1,000 a month and generate a monthly profit of up to $400.

Investors likewise pounced on a three-bedroom, three-bathroom home in a gated subdivision that Dias just showed. It has at least three offers at its $220,000 asking price, he said.

"People are cherry-picking and finding the right ones," Dias said. "They see prices are at a bottom." "Do I see the tide turning? Yes," Dias added.

 My agent told us that we would have a very hard time selling our home right now. Too many foreclosures on the market. But if I had money, I would say now is the time to pick up some investment property cheap. I owned real estate before and tenants can really ruin a good rental property. I saw an article a month ago that stated real esate agentsin CA were hiring buses to take their clients on a tour of foreclosures available. Isn't that crazy????

if people think housing is bad now, just wait until the Prime mortgages default.

First it was subprime that tanked

Currently, it's the Alt-A.

I know this is off topic, but the threads seems to have lost it's steam.

Is it just me, or does the word "some" get way too much credence today? Mainstream media uses "some" to lead into stories like it has some importance. In this day and age there is rotinely some with an opposing opinion. I think they use "some" so they don't have to check the background on their story. And is "some" a prominant, accepted, majority view or the opinion of just a few?

Some might say I just vented a little.

Some might say I'm full of hot air.

Some might say................

Thanks for voting ......oust the incumbants

Thanks for the info.

I completely agree that renting might be a better option than selling.  There are several houses in my neighborhood that are realistically priced, decorated very nicely, and are not even being looked at (I've talked to the homeowners).  I am not too concerned, because I know we won't be moving anytime soon, and I know the housing market will eventually recoup, just like the major internet companies did after the .com bubble burst.

The Real Estate market in Cleveland is a mess.  There's so many foreclosures and you can drive down the street and see one house after another one empty and now that it's summer the grass is growing and the neighborhoods look terrible with these houses everywhere.  This has been a nightmare and who knows how far it will go.  They say all our property values are down and I think they should lower our taxes but I haven't seen that happen.  I feel so bad for all the people that have lost their homes.  Their children had to leave their friends and schools and relocate to who knows where.  What were all these lenders thinking when they rigged these loans?  If we ever get out of this I hope the Lenders will become wiser than what they were this time.  Have a good night Goldiec

 The only ones who are buying right now, are professional Real Estate Investors.  Most have taken courses in different sales techniques and financial options.  Short sales make a great tactic to immediately releive the owner of a dilemma, as well.  There are quite a few options out there, but which one we choose is just that-which one we want to deal with.