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 percent 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 percent from its housing bubble peak, median prices have rebounded less than 4 percent, 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 percent 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 percent discount
Unlike Chicago, Orlando’s strong points aren’t deep discounts or a vast supply – the metro has only a 19 percent discount on foreclosures and a smaller inventory of foreclosed homes to sell. But it has other things going for it, including a 64 percent 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 percent 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 percent and 34 percent in those areas, respectively. Thus, metro Orlando probably offers a limited window for getting a great deal in housing.
8. Poughkeepsie, N.Y. – 28 percent 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 percent discount. The area's employment grew 1 percent over the past 12 months and 2.5 percent over the past three years, which trails the national average of 4 percent.
The median housing price is just under $200,000 and is up 4 percent over the past year, according to Trulia, an online real estate information site.
See the rest of the story at Business Insider
Please follow Your Money on Twitter and Facebook.