The U.S. foreclosure crisis looks like it's finally winding down -- great news for homeowners, but decidedly less positive for house hunters and real estate investors. "From the perspective of buyers, [some] markets might not be as attractive anymore," says Daren Blomquist of market watcher RealtyTrac. The organization recently found that U.S. foreclosure-related filings fell during 2012 for the second straight year.
RealtyTrac, which monitors county registries of deeds around the country, says lenders filed paperwork covering around 1.9 million foreclosures, deed seizures and property resales in 2012 -- a roughly 34% drop from 2010's 2.9 million peak. The firm also analyzed all 102 U.S. metro areas with 500,000 residents or more and found that filings fell by double-digit percentages in many locales during 2012.
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Blomquist says house hunters and investors looking to buy foreclosures on the cheap in those cities can expect to "compete against each other for places this year. The foreclosure supply is drying up, but there's still interest from other buyers."
The expert says markets with the worst prospects for buyers are generally in "non-judicial foreclosure" states, where laws allow lenders to seize properties quickly with little court involvement. For instance, the average foreclosure finalized in nonjudicial Texas during 2012's fourth quarter took just 113 days from start to finish versus 1,089 days in judicial-foreclosure New York. Blomquist says nonjudicial states' speedier processes have allowed banks to clean out backlogs of delinquent properties there, making fewer distressed homes available for would-be buyers.
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"The worst cities for foreclosure buyers are typically those places that worked through their problems fairly quickly," he says, adding that people looking for deals should check out metro areas with more problems. Click through the gallery below for a look at the five metro areas that RealtyTrac predicts will offer would-be foreclosure buyers the worst deals in 2013.
The firm based its rankings on a number of factors, such as how many months of unsold foreclosures each city had on the market as of Dec. 31. All figures cover houses, townhouses, condos and apartment buildings with four units or less. Average percent discounts on foreclosures refer to properties sold during 2012's first 10 months, the latest period with data available.
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