Best Markets to Buy a Foreclosure Today

by Steve CookJuly 12, 2017

Just six years ago, more than a third of all the houses sold in America were “distressed sales,” homes lost by families that could no longer make their monthly mortgage payments and who had lost their homes to foreclosure or short sales.

Foreclosures no longer make headlines, and many people may think they have fallen to negligible levels or disappeared altogether. In fact, distressed sales are still around, but account for only 6 percent of all home sales compared to about 40 percent in 2011.

The “foreclosure flood” created extraordinary opportunities for real estate investors to buy distress sales, fix them up, and either “flip” them for a quick profit or convert them into single-family home rentals. In recent years, the foreclosure market has changed as the housing recovery restored value to homes. Foreclosures sales are falling to ten-year lows. The distressed sales share of home sales fell to 7 percent of all sales in January; the lowest distressed sales share for any month since September 2007.
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A major reason for the decline is the soaring price of foreclosures. Prices of all homes have risen some 87.1 percent from the lowest point during the Great Recession in 2012. Also, the “foreclosure discount,” the difference between market prices and distress sale prices, has fallen significantly, from about 27 percent in 2010 to about 20 percent below market value in May. When the costs of repairing and remodeling a foreclosure are added to the acquisition cost, it is difficult for “flippers” to make a profit today.

Supplies of foreclosures are at ten-year lows. In April, foreclosures were down 23 percent from April 2016 and fell to the lowest level since November 2005. Foreclosure buyers today concentrate on states where foreclosures are most plentiful because foreclosure discounts are greater and they have more properties from which to choose.

The geography of foreclosures has almost changed completely. No longer are they located largely in the “sand states” of Arizona, California, Florida, and Nevada where the housing bubble reached its greatest size before bursting. Today, the top states for foreclosures are more likely to be located in the Midwest, New England, Mid Atlantic, and Southeast. Many of the top foreclosure states are “judicial” states, where foreclosures must use go through the court system, which can significantly delay the foreclosure process.

buy a foreclosure

Counter to the national trend, states that increased their foreclosure activity in April on a year over year basis was District of Columbia, New Jersey, Connecticut, and Massachusetts (up 3 percent). Three of the nation’s 20 largest metro areas posted year-over-year increases in foreclosure activity: St. Louis (up 12 percent), Houston (up 7 percent), and Boston (up 3 percent).

Homes.com’s Foreclosure Center is a great place to find the very latest foreclosure listings by state, metro, or zip code. Here are the top ten states with the highest foreclosure rates as of March:

1. New Jersey

March 2017 Foreclosure Rate: 1 in every 497 housing units
Change from February 2017: Up 17.37% (was No. 1)
Change from March 2016: Up 33.67% (was No. 3)

2. Maryland

March 2017 Foreclosure Rate: 1 in every 820 housing units
Change from February 2017: Down 8.49% (was No. 3)
Change from March 2016: Down 34.12% (was No. 1)

3. Nevada

March 2017 Foreclosure Rate: 1 in every 857 housing units
Change from February 2017: Up 26.34% (was No. 5)
Change from March 2016: Down 17.10% (was No. 4)

4. Delaware

March 2017 Foreclosure Rate: 1 in every 858 housing units
Change from February 2017: Down 22.60% (was No. 2)
Change from March 2016: Down 31.39% (was No. 2)

5. Illinois

March 2017 Foreclosure Rate: 1 in every 863 housing units
Change from February 2017: Up 2.93% (was No. 4)
Change from March 2016: Down 6.86% (was No. 6)

6. South Carolina

March 2017 Foreclosure Rate: 1 in every 1,146 housing units
Change from February 2017: Up 13.52% (was No. 8)
Change from March 2016: Down 18.86% (was No. 7)

7. Connecticut

March 2017 Foreclosure Rate: 1 in every 1,156 housing units
Change from February 2017: Up 1.02% (was No. 7)
Change from March 2016: Up 6.43% (was No. 14)

8. Ohio

March 2017 Foreclosure Rate: 1 in every 1,157 housing units
Change from February 2017: Down 5.91% (was No. 6)
Change from March 2016: Down 23.35% (was No. 8)

9. Florida

March 2017 Foreclosure Rate: 1 in every 1,245 housing units
Change from February 2017: Down 4.15% (was No. 9)
Change from March 2016: Down 41.07% (was No. 5)

10. North Carolina

March 2017 Foreclosure Rate: 1 in every 1,332 housing units
Change from February 2017: Up 11.65% (was No. 11)
Change from March 2016: Down 5.47% (was No. 16)

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About The Author
Steve Cook
Steve Cook is editor and co-publisher of Real Estate Economy Watch. He is a member of the board of the National Association of Real Estate Editors and writes for several leading Web sites, including Inman News. From 1999 to 2007 he was vice president for public affairs at the National Association of Realtors.

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