5 Best Places to Buy Foreclosures in 2013

BOSTON ( TheStreet) -- Homebuyers and real estate investors who swoop in to certain foreclosure-wracked U.S. markets this year could find discounts of 40% or more, a RealtyTrac study predicts.

"I don't think a high foreclosure rate should be the kiss of death for any given market in 2013 if you're a would-be buyer or investor," RealtyTrac Vice President Daren Blomquist says. "In this market, it just means there's more available inventory for you to purchase."

RealtyTrac, which compiles information from more than 1 million U.S. foreclosures per year, recently analyzed all 102 metro areas with 500,000 residents or more to determine which seem likely to offer buyers the best deals in 2013.

The site considered several factors, such as what percentage foreclosures made up of all homes sold in each location between January and October (the latest period with data available).

Blomquist says the best metro areas for buyers are basically those with the biggest foreclosure woes.

"These are markets where buyers have more foreclosure inventory available and more leverage with sellers," he says. "If you don't like the deal that one seller offers you, you can simply move on to the next property."

RealtyTrac found the top such markets in just two states -- Florida and New York.

Blomquist says that's partly because the foreclosure crisis hit both locales hard, but also because Florida and New York are "judicial-foreclosure" states. Those are areas where foreclosure laws require lenders to go through long court proceedings to seize homes -- creating huge backlogs of distressed properties.

"The judicial-foreclosure process is lengthier and more susceptible to delays, and the consequence of that is that markets in those states are going to have the longest path to a true recovery," Blomquist says.

Here's a look at the five best U.S. markets that RealtyTrac sees this year for people interested in buying foreclosures.

All sales figures refer to houses, townhouses, condos and apartment buildings with four units or less that sold between Jan. 1 and Oct. 31, 2012. All backlogs of unsold foreclosures are as of Dec. 31, the most-recent period with data available.

Fifth-best market: Lakeland, Fla.

Blomquist says Florida's seesawing housing market -- which boomed in the early 2000s, then went bust around 2007 -- hit Tampa so hard that the downturn spilled over to Lakeland, a 590,000-population metro area some 35 miles away.

"A lot of times 'ex-urban' communities around a really hot area are very affected by a boom and bust," he says. "There's a lot of homebuilding in such places during the boom, but then there's an oversupply of houses when the bust hits."

As a result, Lakeland -- best known as the Detroit Tigers' spring training home -- saw foreclosure filings rise 95.7% during 2012.

Distressed properties also accounted for a quarter of all homes sold there during the January-to-October period, while RealtyTrac found the area has a 34-month glut of foreclosures on the market.

Blomquist attributes much of the backlog to Florida's strict judicial-foreclosure rules.

RealtyTrac found that the average Sunshine State foreclosure finalized during 2012's fourth quarter took 853 days to complete -- more than double the 414-day national average.

Of course, that means Lakeland-area foreclosure buyers enjoyed a 28.05% average discount during 2012's first 10 months, according to RealtyTrac. Blomquist expects similar bargains in 2013.

Fourth-best market: New York City

The Big Apple offered buyers a ripe and juicy 40.4% average discount on foreclosed properties in 2012's first 10 months, and RealtyTrac expects such deals to continue or even improve this year.

That's because the metro area -- which includes Long Island, the city's northern suburbs and parts of New Jersey and Pennsylvania -- has a 97-month backlog of foreclosed properties on the market.

Again, blames for the excess inventory goes to the state's lengthy foreclosure proceedings. RealtyTrac found that New York State home seizures finalized during the fourth quarter took 1,089 days on average from start to finish -- the longest process in America.

"New York courts have been particularly aggressive in not letting lenders foreclose unless they have all the proper documentation in place," Blomquist says.

Third-best market: Albany/Schenectady, N.Y.

New York State's capital suffers from the same long foreclosure process and distressed-property backlog that's hitting Gotham, according to Blomquist.

RealtyTrac found that Albany has an 86-month supply of seized homes on the market -- and saw foreclosure filings soar 107.7% in 2012.

All told, foreclosure buyers in this 871,000-population metro area some 120 miles north of New York City got 35% average price breaks during 2012's first 10 months. RealtyTrac predicts more of the same in 2013.

Second-best market: Rochester, N.Y.

This city 325 miles northwest of New York City along Lake Ontario saw foreclosure filings rise 132.6% last year, leaving Rochester with a 78-month supply of unsold distressed homes.

Again, Blomquist blames New York State's arduous foreclosure process. "There's a big backlog of cases," he says.

The good news for would-be buyers -- people who bought distressed properties in the 1.1-million-person metro area between January and October 2012 saw 25.8% average discounts. Blomquist sees such deals continuing this year.

No. 1 best market: Palm Bay/Melbourne/Titusville, Fla.

This metro area along the Atlantic coast is home to the Kennedy Space Center -- which is fitting, because its market soared toward the moon during the housing boom, then fell back to Earth in the bust.

"You have still the leftover wreckage from the housing bubble -- bad loans, a slow foreclosure process and lots of people who are 'underwater,'" Blomquist says.

The Kennedy center has also cut thousands of jobs in the past year or so following the space-shuttle program's termination, adding to the 540,000-population area's problems.

"A soft underlying job market only aggravates the Palm Bay region's foreclosure problems," Blomquist says.

RealtyTrac says local foreclosure activity rose a whopping 308.7% last year, with foreclosures accounting for 23.8% of all property sales in the first 10 months. The site also estimates the region has a 34-month supply of distressed properties.

Of course, that means foreclosure buyers enjoyed a 28% average discount during 2012's first 10 months -- bargains RealtyTrac expects to see repeated in 2013.

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