In the run up to the housing bust, homes priced at $200,000 or less jumped considerably in value. During the bust, these properties fell at an equally rapid rate.

Amherst Securities said investor participation in this side of the housing market will increase considerably, and the government’s bulk sales program has tremendous potential to increase this further.

The Federal Housing Finance Agency earlier indicated a REO-to-rental program for certain foreclosed Fannie Mae and Freddie Mac properties.

"Even if only part of that potential were realized, home prices could stabilize, or, in certain communities, increase at the lower end of the market," the research states in the firm's "Mortgage Insight" report.

The report states that simple profitability metrics are driving investor interest in the space, where they will compete for the best margins with potential owner-occupants. This is not likely the case at the higher end of the market.

"A $600,000 home does not rent for five times the rent on a $120,000 home," the report states.

The gross cap rate on properties worth less than $100,000, purchased for renting, is between 14% to 25%, Amherst concludes. The gross cap rate drops below double digits around the $200,000 market. Jumbos, by way of comparison, earn a gross cap rate of less than 7%.

"At current price levels, lower-priced homes are attractive to both an owner-occupant and to an investor," the report states. "By contrast, higher-priced homes can be sold only to owner-occupants."