NEW YORK ( TheStreet) -- Investors looking to buy foreclosed property can still find good bargains in Florida and New York, according to a report by RealtyTrac. Metro areas with a population over 500,000 were scored on the basis of number of months' supply of inventory, percentage of foreclosure sales, the average discount to market price on a foreclosure sale, and percentage increase in foreclosure activity in 2012. Topping the buy list was the Palm Bay-Melbourne-Titusville metro area in Florida, where there is now 34 months' supply of inventory representing 24% of all sales. Foreclosure activity rose 308% in the area. While the foreclosure discount has been narrowing nationally, properties there sell at a 28% discount to market price. Five other Florida cities ranked among the top 20 best places to buy foreclosures: Lakeland, Tampa, Jacksonville, Orlando and Miami. In New York, where it takes an average of more than three years to complete a foreclosure owing to its court process, cities such as Rochester, Albany, New York, Poughkeepsie and Syracuse top the list of the best places to buy foreclosed homes. "Markets with increasing foreclosure activity in 2012 took the first step in finally purging delayed distress left over from the bursting housing bubble," said Daren Blomquist, vice president at RealtyTrac. "Meanwhile, the underlying fundamentals in many of those markets are slowly improving, making it an opportune time to absorb additional foreclosure inventory this year -- and that is particularly good news for buyers and investors hungry for more inventory to purchase in those markets." Indeed, buyers have been complaining of a lack of inventory in other parts of the country. The latest existing-home sales report showed that the total supply of inventory had fallen to 1.82 million homes, representing only 4.4 months' supply of inventory, the lowest level since 2005. Homes available for sale have declined due to a combination of falling foreclosure activity, strong investor demand and lower construction work, among other things. Foreclosure activity saw a sizeable drop in 2012, declining in 57% of metro areas, as big banks including Bank of America ( BAC) and JPMorgan Chase ( JPM) pursued alternatives such as short sales and loan modifications instead of foreclosure under a nationwide mortgage settlement. Investor demand for distressed properties also soared, with big players such as Blackstone ( BX) pumping millions into foreclosed homes with the intent of converting them into single-family rentals.
As a result, in cities such as Phoenix and San Francisco, the level of distressed inventory declined more than 30%, leading to a sharp rebound in those markets. However, the trend has not been uniform, with some states, mostly ones that require banks to prove in court that the borrower is in default in order to foreclose, still seeing a rise in foreclosures. Tampa saw an 80% increase in foreclosures, while Miami, Baltimore and Chicago had a jump of over 30%. New York foreclosure filings rose 28%. Many have argued that the judicial foreclosure process is holding back the recovery in states such as New York and Florida. Still, the judicial foreclosure process has helped in some ways. It has prevented foreclosed homes from hitting the market all at once, preventing steep declines in some markets and allowing investors more time to absorb excess inventory at a measured pace. (Watch TheStreet's interview with Daren Blomquist on how some of the new foreclosure laws are hurting the housing market.) (For more on why now is a good time to buy homes, read this.) (Also check out Trulia's list of where and where not to buy in 2013.) -- Written by Shanthi Bharatwaj in New York >To contact the writer of this article, click here: Shanthi Bharatwaj. >To follow the writer on Twitter, go to http://twitter.com/shavenk. >To submit a news tip, send an email to: email@example.com.