After a slow start, the volume of bids on LoanMarket more than quadrupled in August, he said, adding the stabilization of the housing market and the economy may have played a part as well as the discounts available from banks and funds that need to unload underwater investments.

In one example, a loan of $222,200 on a home in Riverside, one of the worst hit areas of California, sold for $80,000, or just 66.5 percent of the home's $120,300 estimated value now.

Dennis Regan, an investor with ClearVue Capital in Irvine who buys both properties and loans, said the time is ripe for his business with sellers more willing to accept the distressed prices he and other investors are offering than early 2009.

The current price for bank-owned properties is just 65 percent of market value. For loans, it's 59 percent, he said.

There is more realism on the side of the sellers, he said. The market has beat them over the head.

DOUBLE DIP IN PRICES?

But buyers still run the risk of seeing prices fall again.

While many forecasters are saying that the worst U.S. recession since the Great Depression has ended, unemployment is at 9.8 percent, the highest rate in 26 years, and it could rise.

More unemployment would swell the ranks of homeowners unable to meet mortgage payments and teetering on foreclosure.

And then there is the question of all the bank-owned property that has yet to go to market.

Online property marketplace RealtyTrac CEO James Saccacio said last month there remains an ample supply of property in the foreclosure pipeline and a record number of properties entering default or being scheduled for a public foreclosure auction for the first time.

Pressure on home prices could be severe if lenders dump unacknowledged foreclosures on the homes market, said economist Christopher Thornberg of Beacon Economics in Los Angeles.

Is there a chance for a double dip in home prices after this next surge of foreclosures hits the market? Absolutely, Thornberg said.

They could hit the market at any time from two months to two years ...The question is: 'When are those people actually going to get booted?'

Additional foreclosures would provide more supply to investors but the possibility that it could depress prices still further, and delay a recovery in prices by years or even decades, alarms some investors.

I'm trying to be cautious, said Mike Chouinard of Moreno Valley, California, who quit his job as gasoline refinery worker to invest in foreclosures full-time. I don't want to end up the one without a seat when the music stops.

California Mortgage