On Tuesday, Irvine, California- based RealtyTrac and Trulia Inc., headquartered in San Francisco released the results of a new survey revealing insights to how consumers feel about purchasing a foreclosed property, conducted on their behalf by Harris Interactive, a market research firm based in New York City.

Beginning in May 2008, the survey has been conducted every six months, making this the fourth survey of its type.

“We are seeing a drop in the enthusiasm and excitement that the homebuying audience has expressed in prior quarters for foreclosure purchases,” said Rick Sharga, SVP of RealtyTrac. “What we’re looking at is something that should be anticipated and should really be expected. We’re looking at a fairly typical adoption curve, where some of the early enthusiasm about something new has waned.”

The new online survey was completed between November 5 and November 9, 2009 and showed a notable decrease in consumers’ willingness to buy foreclosed properties. Of adults in the United States ages 18 and above, 43 percent indicated that they are at least somewhat likely to consider purchasing a foreclosed home in the future. This is down from the 55 percent who indicated this in the online survey by Harris Interactive between May 1 and May 5 of this year.

“There are really two sides to this story — the positive and the bleak,” said Pete Flint, founder and CEO of Trulia.

On the bleak side, Flint noted that 81 percent of adults surveyed have a negative sentiment towards purchasing foreclosed properties. While this is lower than the 85 percent who had these feelings in the May 2009 survey, it is concerning to Flint that so many consumers have negative thoughts about foreclosures. According to the survey, 69 percent are concerned about hidden costs, 48 percent think the process is risky, and 35 percent are worried that the home will lose value.

“It is somewhat surprising that consumers cite hidden costs as the biggest negative aspect to buying a foreclosed home because most bank-owned foreclosure sales include the same title protections and other safeguards that are in place for non-foreclosure sales,” Sharga said. “As myths such as this are put to rest and consumers take more time to educate themselves on the process for purchasing foreclosures, they will be able to take advantage of the great bargains that currently exist in the real estate market.”

While the overall appeal towards purchasing a foreclosed property has decreased, the survey found that certain segments still have a strong interest in foreclosures, including real estate investors, current homeowners looking to “trade up” to a larger property, and renters. Sharga said less of the broad market is excited about buying a foreclosed property, but the people who are interested in foreclosures are very serious about it and are actually buying these properties in large numbers.

According to the survey, real estate investors see foreclosures as an opportunity, and nearly one in four adults surveyed said they are at least somewhat likely to purchase a second home or investment property. Of these, 92 percent are at least somewhat likely to buy a foreclosed property.

Additionally, the survey found that interest levels in purchasing foreclosed properties will likely increase during the next several months in response to the recent expansion of the housing credit to current homeowners. Survey results showed that 24 percent of homeowners are at least somewhat likely to “trade up” to a larger home, and 88 percent of these homeowners are at least somewhat likely to consider a foreclosed property.

With 57 percent at least somewhat likely to purchase a distressed home in the future, renters are showing the strongest interest in buying foreclosed properties. The survey found that younger adult renters are significantly more likely to purchase a foreclosed home. Only 40 percent of renters 55 years and older are at least somewhat likely to purchase a foreclosed home, but 61 percent of renters ages 18 to 24 and 65 percent of renters between the ages of 35 to 44 are at least somewhat likely to do so.

“Even during the darkest economic times, dreams don’t die,” Flint said. “Foreclosures are providing never before seen opportunities for new segments of homebuyers and allowing renters to become first time buyers, allowing investors to grab great deals and allowing families to trade up to larger homes. Until unemployment levels off and starts to get better, we expect foreclosures to continue to play a big role in the 2010 housing market.”

When purchasing a foreclosed home, consumers are willing to invest but expect to get a lot for their dollar. According to the survey, 95 percent of respondents are willing to invest money in renovations when purchasing a foreclosed property, but 65 percent expect a discount of 30 percent or more when buying a foreclosed property. Respondents in the Northeast expect even bigger discounts, with 43 percent expecting foreclosed homes to be discounted by 50 percent or more.

In a separate study by Trulia, the company found that the average person invests up to $30,000 when purchasing a new home for items such as furniture, pain, hot water heaters, etc. As more consumers purchase distressed properties, excess housing inventory levels will decrease and additional money will be poured into other industries, which Trulia said will help stimulate the economy as a whole.

“The most active and qualified buyers in today’s market are highly interested in foreclosures, which is not surprising given the discount that often comes with a foreclosure purchase” Sharga said.

The survey found that 57 percent of adults in the United States from ages 18 to 34 are at least somewhat likely to consider purchasing a foreclosed home, but only 24 percent of those ages 55 and older are at least somewhat likely to do so. Additionally, the survey found that 57 percent of current renters are likely to consider purchasing a foreclosed home, compared to 38 percent of current homeowners. One in two of single/never been married adults in the United States, 40 percent of married adults, and 34 percent of divorces/separated/widowed adults are at least somewhat likely to consider purchasing a foreclosed property.

In his projection for 2010 Flint said, “I predict that sales volume will be roughly flat, compared to 2009. Unfortunately, I see house prices continuing to drop another 5 to 10 percent. Also, inventory levels will creep back up, and mortgage rates will move into the range of 6 percent.”

The survey was conducted among 2,203 adults in the United States ages 18 and older by Harris Interactive via its QuckQuery online omnibus service. Results were weighted to be representative of the total adult population in the United States on the basis of region, age within gender, education, household income, race/ethnicity, and propensity to be online.