Here's Where All The Hot Foreclosure Deals Are Hiding


Photo: Flickr/Radworld

The demand for foreclosed homes is so high that investors have picked clean some of the most obvious markets – Phoenix and Las Vegas, for example.But there are still deals if you look in other metropolitan areas in the United States, according to RealtyTrac, an online marketplace for foreclosure properties based in Irvine, Calif. 

By adding up each metro’s inventory of foreclosed homes, foreclosure sales as a percentage of all sales, average foreclosure discount, and the annual increase in foreclosure activity, RealtyTrac found the Top 10 best places to buy a foreclosed home.

10. Chicago – 46 per cent discount on foreclosed homes

Typically, real estate investors want to put their money in growing markets that haven't been discovered yet.

Metropolitan Chicago may not have the greatest job growth -- half the nation's average annual rate -- but its housing market is ripe with opportunities. After falling 37 per cent from its housing bubble peak, median prices have rebounded less than 4 per cent, according to the S&P/Case-Shiller housing price index.

The metro area boasts a healthy 36 months' supply of foreclosed and soon-to-be-foreclosed homes and they're selling at a whopping 46 per cent discount of other home sales. That's the biggest discount of any of RealtyTrac's Top 10 best metros to buy a foreclosed home, helping Chicago secure the No. 10 spot.

'The Midwest has been doing a lot better,' says Ken Fears, an economist with the National Association of Realtors (NAR). Nationally, 'it's hard not to be upbeat when you look back, historically speaking. We're at the nascent level of what will be a protracted, slow, but steady growth in the economy.'

When it comes to foreclosures, he suggests looking at judicial states -- states that involve the courts in foreclosures, which typically slows the process of moving properties to market. The great wave of foreclosures has already peaked in nonjudicial states like California and Arizona. But in judicial states like Florida and New York, a second wave of foreclosed homes is starting to hit the market, keeping prices low and investor interest high.

9. Orlando, Fla. – 19 per cent discount

Unlike Chicago, Orlando's strong points aren't deep discounts or a vast supply -- the metro has only a 19 per cent discount on foreclosures and a smaller inventory of foreclosed homes to sell. But it has other things going for it, including a 64 per cent jump in foreclosure activity between 2011 and 2012.

Orlando's economy is also on the rebound. Thecentral Florida metro's employment growth matches the national average. The median sales price for a single-family home has jumped 8.5 per cent in the past year, according to the NAR. One reason: Hedge funds, investors, and institutional buyers are moving into Orlando to scoop up foreclosed properties the way they already have in other markets.

Foreclosure sales were nearly a third of all home sales last year. After investors poured money into Las Vegas and Phoenix, home prices jumped 20 per cent and 34 per cent in those areas, respectively. Thus, metro Orlando probably offers a limited window for getting a great deal in housing.

8. Poughkeepsie, N.Y. – 28 per cent discount

The Queen City of the Hudson River is home toVassar College, an IBM plant, and foreclosed homes -- lots of them.

The metro area has a 92-month supply of bank-owned properties, the second-biggest backlog on RealtyTrac's Top 10 list. They're selling at a 28 per cent discount. The area's employment grew 1 per cent over the past 12 months and 2.5 per cent over the past three years, which trails the national average of 4 per cent.

The median housing price is just under $200,000 and is up 4 per cent over the past year, according to Trulia, an online real estate information site.

7. Jacksonville, Fla. – 32 per cent discount

Jacksonville has decided to turn the streetlights back on in its business parks, rescinding a cost-cutting measure after real estate companies complained it was hindering business recruitment. The move comes none too soon, because Jacksonville's economy seems to be slowing.

In 2010 and again in 2011, the metro area created roughly 8,000 net new jobs. In 2012, the increase was only 5,000 jobs.

The residential real estate market looks healthier. Home prices were up 7.3 per cent in the fourth quarter of 2012 compared with a year earlier. With 34 months' supply of foreclosed homes selling at a 32 per cent discount, there are deals to be had. The housing market may be a little stronger because Jacksonville has the highest homeownership rate of the 25 most populous US cities, according to a study by website NerdWallet.

6. Tampa, Fla. – 27 per cent discount

The host city of the 2012 Republican National Convention has seen its economy rebound, but the housing market hasn't caught up yet.

Employment grew 1.7 per cent over the past year and 5.5 per cent in three years, beating the national average. (It's the only metro area on this Top 10 list to do so.) But after seeing home prices nearly fall by half during the housing debacle, the metro area has only seen a 7.6 per cent rebound in real estate prices, according to the Case-Shiller index.

Add to that an estimated 34 months' supply of foreclosures selling at an average 26.6 per cent discount to other homes, the metro market remains a place where investors or would-be homeowners should be able to find a deal.

5. Lakeland, Fla. – 15 per cent discount

Its economy isn't inspiring. Lakeland is tied withChicago as the metro with the highest unemployment rate -- 8.6 per cent -- among the Top 10 list. Unique among those Top 10 metros, it continued to lose jobs after the Great Recession and only began to see job growth in 2012.

On the plus side, the Detroit Tigers baseball team is back in town for spring training. The weather is warming up -- and so is the real estate market. Home prices are up 10.6 per cent from a year ago, according to Trulia. Home building activity made some impressive gains last year, especially in the upscale end of the market.

Of the metros on RealtyTrac's Top 10 list, Lakeland has the smallest discount on foreclosure properties, which might signal that the window of opportunity is closing in Lakeland, even though RealtyTrac estimates it has a 33 months' supply of foreclosed homes.

4. New York – 40 per cent discount

As important as it is as a housing market, the metro New York area (which includes Long Island, northern New Jersey, and parts of Pennsylvania) has not been particularly robust.

Home prices have barely recovered from the trough last March, according to Case-Shiller. And they're still down a quarter from their peak in 2006.

Job growth is just a little below the one-year and three year national average.

Investors may be particularly interested in the New York metro area because it has the largest supply of foreclosures of any of RealtyTrac's Top 10 metro areas -- 97 months -- and they're selling at a 40 per cent discount to other homes. That's probably because a second wave of foreclosures is hitting the market in judicial states such as New York and New Jersey. Nationally, bank repossessions fell 17 per cent last year, but they rose 55 per cent in New Jersey, according to RealtyTrac.

3. Albany, N.Y. – 35 per cent discount

By the standards of New York State, the real estate market in the state's Capital District, which includes nearby Troy and Schenectady, has not distinguished itself.

Prices have climbed 5.9 per cent in the last year, according to the NAR, which is far better than Binghamton(minus 5.7 per cent) but not as good as Elmira (9.7 per cent).

Since it didn't participate much in the housing bubble in the 2000s, Albany has escaped most of the housing bust. As a place to buy foreclosures, however, the metro area stands out. It has a projected 86 months' supply of foreclosed homes.

In such a slow-moving market, investors may not make much in terms of appreciation. But with foreclosed properties selling at an average 35 per cent discount, there's room for profit.

2. Rochester, N.Y. – 25 per cent discount

From a fiscal point of view, the city of Rochester is hurting.

The city faces a deficit (and a state cap on local property taxes makes it difficult to rely on taxes to bridge the gap). Its school system is heavily in the red; even its symphony is short of money.

But as a real estate market, the metro area may well be a great place to invest in foreclosures, according to RealtyTrac. Home prices are a third lower than in Albany and have risen only 4.3 per cent over the past year, slower than in Albany, and at half the national rate, according to the NAR. And while foreclosures sell at less of a discount than Albany -- 25 per cent -- Rochester sports a robust 78 months' supply.

1. Palm Bay, Fla. – 28 per cent discount

The No. 1 place to buy foreclosed property is not among Florida's biggest metros but in midsized Palm Bay, halfway between much larger Jacksonville and Miami.

Home to theKennedy Space centre, it is commonly known as Florida's 'Space Coast.' (Its 321 area code was specially awarded to recognise the 3-2-1 liftoff countdown sequence at Kennedy).

After the end of America's shuttle program in 2011, some 8,000 people lost their jobs at the space centre. But the economy seems to have bottomed out and in 2012 added some 4,000 new positions.

The housing market has been on a tear, with prices rising 14.7 per cent last year, according to the NAR, putting Palm Bay in the top 25 metros for price appreciation. Making it No. 1 on RealtyTrac's Top 10 foreclosure list was a 309 per cent increase in foreclosure activity last year, more than double the increase in No. 2 Rochester. So even as the real estate market heats up, Palm Bay still has a 34 months' supply of foreclosed homes, selling at an average 28 per cent discount.

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