I've not been bullish on the market for sfrs lately as many of my posts have stated. I continue to be cautious. When everyone is jumping on any bandwagon, the wagon may overload and break down.
If you're buying STRICTLY for existing cash flow, I think it is still ok. Buying to flip or short term is foolish, imo. Here is ANOTHER article backing up my concerns.

http://www.msnbc.msn.com/id/35832152/ns/business-washington_post/page/2/

Here is the reason this really worries me. There is a feeding frenzy, auction scenario in many areas like FL, Vegas, Phoenix and others. Prices are being bid up with NO logical reason.(does that sound familiar to previous times?) The first wave of foreclosures was primarily due to the subprime loan mess. There are now millions MORE homes in jeopardy with more problems to come. As article explains, it normally takes 6-7 months of missed payments before lenders start foreclosure. Millions of homes are falling into that area now. Lenders are still not lending, which means purchases must be for cash.
It is also obvious that many lenders have been delaying foreclosures and then delaying resale of these REOs. These HAVE to hit the market sometime! There are numerous reasons why lenders are witholding properties , but imo, one is front and center.
If the lender shows on their balance sheet a note/mortgage, it shows as an asset of full value. When they repo and sell this asset for 50% of loan, the balance sheet drops by 50% on that asset, even though the 50% is cash. When they do this too much, too fast, their balance sheet drops considerably and then they risk not being able to pass the govt stress test required for banks! They may even face closure by the fed govt. if their "health" looks bad. That is why their reos are trickling into marketplace.
If we have round 2 of foreclosures, no one knows what this will do to the fragile RE rebound currently manifesting itself. Never before did we have a subprime meltdown. No one was ready for it nor knew what the results would be. I also don't believe anyone knows what will happen with this coming round 2, which is the GOOD prime loans!

Here is a top ten to address:

1. will banks loan?
2 will banks take the losses on balance sheets and release more reo's?
3.will investors still buy?
4.will investors still have cash?
5. will prices/rents continue to drop?
6.will tenants still have jobs and money to pay rents?
7.will govt create more "giveaway" programs to "fix" mess?
8.will these new programs create a false temp value of homes?
9.will these homeowners being bailed out be a temp fix?
10.will the weight of new giveaways be the last straw that crushes our economy and status in the world and start the dominos falling?

I think 10 is enough! I'll continue to voice my reasons for concern. All is not well, yet, and may get even worse. I know that no one wants to think that, but your livlihood could depend on decisions and choices you make now, imo. Tortoise and the hare----Right now, the tortoise method seems better, imo. Rich.