Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.

The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae and Freddie Mac to investors in bulk. The properties would then be converted into rentals.

In addition to getting the properties off the government’s books, officials are hoping putting the homes back into productive use will stabilize neighborhoods and housing values. Also, it is looking to expand the supply of rentals, which are increasingly in demand.

The agency is not releasing details on how the rental program would work, instead saying it is “proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012.”

Until now, most foreclosed homes have been sold individually because investors have demanded bigger discounts to buy large numbers of properties.

There are close to 2 million homes in the late stages of delinquency, according to Lender Processing Services. Since foreclosed properties often sell below market value, they can wreak havoc on home prices.

New York Fed President William Dudley gave a speech that touched on a wide range of housing policies — including principal reduction and mortgage refinancing — that he believes will boost the economy.

The Fed has already tried to boost real estate sales by pushing mortgage rates down to record lows through massive bond-buying programs.

But the renewed push for housing help indicates that the Fed, which has basically run out of monetary policy ammunition to revive the real estate market, is urging the federal government to ramp up its efforts.

“The Federal Reserve is signaling in even stronger terms the need for the government to do more to help housing,” said Jaret Seiberg, a policy analyst with the Washington Research Group.

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The top 10 U.S. metro areas with the greatest year-over-year median home-value declines, by percentage, from October 2010 to October 2011, were conspicuously clustered in two regions – the southeast and far West – according to data from online real estate site Zillow.

The 10 metro areas, clumped in the Southeast and the far West, declined an average of 13.4 percent, from No. 1 Gainesville, Fla.’s 17.2 percent drop to an 11.8 percent decline for No. 10 Reno, Nev.

The chart-topping Gainesville, Fla., metro area’s 17.2 percent decline settled the area’s median home value to $111,300.

Just 40 miles away, the Ocala, Fla., metro area, No. 7 on the top 10 list, showed a 12.7 percent decline in median home value, to $85,200. Nearby, Atlanta and Mobile, Ala., rounded out the Southeast metros on the list at No. 2 and No. 5, respectively.

The far West portion of the top 10 features six metros in a Pacific-leaning band that curves from No. 3 Medford, Ore., in the Northwest to No. 6 Tucson, Arizona.

The Mobile, Ala., metro area, at No. 5, has the lowest median home value on the list at $78,200, and is counterbalanced by No. 9 Santa Barbara, Calif.’s highest median home value of $371,200. After Santa Barbara, Calif., the next highest median home value on the list takes a steep drop to No. 4 Chico, Calif., metro area’s $169,300.

The number of distressed properties not currently listed for sale on multiple listing services (MLSs) stood at 1.6 million as of October 2011, according to CoreLogic.

For every two homes available for sale, there is one home in the “shadows.”

CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on MLSs that are seriously delinquent (90 days or more), in foreclosure, and real estate owned (REO) by lenders.

Of the 1.6 million properties currently in the shadow inventory, 770,000 units are seriously delinquent, 430,000 are in foreclosure, and 370,000 are REO.

Despite 3 million distressed sales since January 2009, a period when home prices were declining at their fastest rate, the shadow inventory in October 2011 is at the same level as January 2009.

Growth in the shadow supply, though, has been reined in by the fact that the flow of new seriously delinquent loans into the shadow inventory has been offset by a roughly equal flow of distressed REO and short sale transactions.

Currently, Florida, California, and Illinois account for more than a third of the shadow inventory. The top six states, which would also include New York, Texas, and New Jersey, are home to half of the shadow inventory.

Home prices are falling in most major U.S. cities, and at least 10 major markets are at their lowest point since the housing bubble burst.

The Standard & Poor’s/Case-Shiller 20-city index shows price declines in 19 cities from January to February. The index fell for the seventh straight month. Prices fell at a faster rate in 11 markets in February compared with the previous month.

High unemployment, stricter lending rules and fears that prices will fall further are among the reasons why few people are buying and selling homes. A record number of foreclosures are forcing down home prices in most metro areas, and prices are expected to keep falling through this year.

“There is evidence that potential sellers are holding their properties off the market, waiting for housing prices to stop falling,” said Bricklin Dwyer, an analyst at BNP Paribas.

Detroit was the only market to show a monthly gain, although the Motor City is one of five cities where home prices are now below their January 2000 levels.

Prices in Atlanta, Charlotte, Chicago, Las Vegas, Miami, New York, Phoenix, Portland, Ore., Seattle and Tampa are all at their lowest point since 2006 or 2007, at the height of the housing boom. The cities with the steepest declines from January were Minneapolis, San Francisco, Chicago and Miami.

In many depressed markets, a significant percentage of buyers are really investors and private equity firms looking to cash in on cheap real estate.

The housing sector is struggling even while much of the economy is recovering slowly but steadily. Some of the worst declines in home prices are in cities hit hardest by unemployment and foreclosures.

Foreclosures are expected to rise to 1.2 million this year as many banks revisit thousands of foreclosure cases, spurred into action by federal regulators who have ordered top-to-bottom reviews of how foreclosures were carried out over the past two years.

“It’s hard to sell when buyers have the leverage and foreclosures continue to create a gap between distressed sale prices and non-distressed sale prices,” said Jonathan Basile, an economist at Credit Suisse Securities. More than 90 percent of homeowners say it’s a bad time to sell their home, according to the Reuters/University of Michigan Survey of Consumers.

The Case-Shiller index measures sales of select homes in those cities compared to January 2000. For each of the 20 metro areas it studies, the index provides an updated three-month moving average price. By measuring the sales price of the same homes over time, the index attempts to gauge true market values.

Despite the fact that rents are now higher in many cities than monthly mortgage payments, the latest report on the health of the housing market offers a dismal picture, showing little sign that home prices are hitting bottom. Prices in January fell 3.1% compared with the same month during the previous year, according to Standard & Poor’s Case-Shiller Index. The index of 20 U.S. cities fell to 140, just a point above its spring 2008 low in the wake of the financial meltdown.

In many cities across America, home affordability has returned to pre-bubble levels, making real estate look like a bargain. But aside from investors snatching up properties at lower prices, few people are actually buying amid high unemployment and tighter lending standards. In fact, in cities outside major metros with high foreclosure rates, sellers will likely cut their asking price.

On average, U.S. home sellers will reduce their list prices after about 2.5 months, or 79 days on the market, by 8%, according to a new report by real estate website Trulia.com. After making one reduction, 35% of these sellers will make a second. Sellers in America’s 50 largest cities have been more aggressive and quicker to make the first price reduction than the rest of the country.