Lenders refer to foreclosed homes as REO, short for "real-estate owned", and they try to sell REO homes as

quickly as possible to minimize holding costs. In the first half of 2006, REO properties accounted for 3.1% of all

U.S. home sales, up from 2.4% two years earlier. Are there bargains? Maybe: those homes sold at a median

discount of 14% to their estimated value (estimated by a computer model) in the first half, compared with

12.5% two years before. The housing boom of recent years reduced foreclosure rates because most people who

fell behind on their loans could refinance or quickly sell their homes for at least enough to pay off the loans (no

surprise to any loan officer). REO sales are a lagging indicator of the housing market because at least months

elapse between a borrower's default and the foreclosure. Most REO homes are listed by real-estate brokers and

sold like ordinary houses but lenders may rely on auctions when they see their REO inventories piling up.