After months of preparation, local governments have started buying foreclosed houses under the federal economic-stimulus program. But they are running into an unexpected snag -- stiff competition from investors.

The reason: The market has changed significantly since early 2008, when the Neighborhood Stabilization Program was created. Home prices and mortgage rates have fallen so much that investors and first-time buyers have swept in, at least in Fresno and other cities in the Valley.

In some cases, foreclosures are getting 20 offers -- and those investors compete with the local governments, which cannot offer more than 99% of the market value. Investors can offer more.

Meanwhile, the clock is ticking. Fresno county and city officials have $18 million to spend, but they have to return any amount that's not committed by Aug. 31. Some feel that might not be enough time, given the competition.

A Fresno City Council member said it took too long to get the city's program going. City officials awarded contracts to four entities that are buying and remodeling the houses before they are sold to low-income families. The final contracts were signed last week.

Read the complete story at fresnobee.com