Where the Foreclosure Crisis Hit Hardest: Small Town, USA

foreclosuresBy Les Christie for CNNMoney

NEW YORK -- The housing collapse has dramatically changed the nation's foreclosure landscape.

Neighborhoods boasting modern homes, cul-de-sacs and tree-lined streets in and around Western cities now dominate the list of the top 100 U.S. ZIP Codes hit hardest by foreclosures, and claim and comprise all of the top 10 spots, according to data generated for CNNMoney by RealtyTrac. In 2011, Western states claimed 82 of the 100 worst hit ZIP Codes with 38 in California and another 28 in Nevada.

That's quite a departure from when CNNMoney first looked at the top foreclosure ZIP Codes in June 2007. Back then, the auto industry's ills had turned neighborhoods in Detroit, Cleveland and Indianapolis into foreclosure ground zero, with the three cities claiming 25 of the nation's 100 hardest hit neighborhoods.

These older working-class neighborhoods were particularly blighted with vacant, repossessed homes lining the streets. In fact, they claimed six out of the list's top 10 spots.

These days, however, many of the worst hit ZIP Codes are communities that were built in the past decade or two in and around once-rapidly growing metro areas like Phoenix, San Bernardino, Calif. and Las Vegas, now the poster child of the foreclosure mess.

In fact, Las Vegas claims all five of the top five hardest hit ZIP Codes. The number one spot goes to a neighborhood in North Las Vegas (in ZIP Codes of 89031) that recorded 2,469 foreclosure filings last year, according to RealtyTrac.

In California, the towns of Lancaster (93535), in the central part of the state, and Fontana (92336), near San Bernardino, claimed sixth and seventh place -- the highest finishers for any ZIP Codes outside of Nevada.

As far as regions go, the South claimed the second highest number of hardest hit ZIPs with 14. Georgia claimed 12 of those neighborhoods, including one in Atlanta that took 10th place. Interestingly, not a single Northeastern ZIP Code made RealtyTrac's top 100 list.

The Foreclosure Effect

Foreclosures can devastate housing markets. Properties repossessed by the banks, called REOs, sell for 25 percent to 50 percent less than non-foreclosures, said RealtyTrac spokesman Daren Blomquist. Yet, a single foreclosure in an otherwise foreclosure-free neighborhood will rarely impact surrounding values, he said.

"In a normal, healthy housing market, an REO sale is the exception and there are many other non-distressed sales that dilute the impact," he said.

It's when REO sales rise to 20 percent or 30 percent of local sales, as they do in the hardest hit ZIP Codes, that they really begin to affect prices, he said.

"That's when we start to see the average discount between REO sales prices and non-foreclosure sales prices dwindle, particularly in local markets where much of the REO inventory consists of relatively new homes built in the last few years," said Blomquist. "The more REO sales dominate a given market, the more they drag down overall home prices."

In a neighborhood like 32811 in Orlando, Fla., which counted 275 homes with foreclosure filings in just one month last year, home prices have plunged dramatically.

One three-bedroom in the area is currently listed for just under $40,000, for example. In 2005, that same home sold for $120,900, according to real estate agent Jerome Baker.

Not only that, but the listing price is "a little bit on the high end," said Baker. "We'll probably have to lower it to $29,000 to generate some interest."

In Fontana, Calif.'s 92336 ZIP Code, the average home price has been cut in half since December 2007, according to Zillow.

A four-bedroom, 2,000-square-foot house, was recently listed for $200,500, down 57 percent from the $465,000 it last sold for in October 2007.

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Where the Foreclosure Crisis Hit Hardest: Small Town, USA

After bidding farewell to 2011, Realtors, investors and regulators the world over are no doubt wondering: Will 2012 be the year the real estate market finally rides out the aftershocks of the housing bust and mounts a full-on recovery?

There are indications that it could be. Big-time investors say that they're bullish on real estate and recent figures showing that pending home sales are at an 18-month high lend credence that view.

But even if home prices don't trend up nationwide, certain markets seem almost guaranteed to do well. Looking at a variety of sources, AOL Real Estate brings you 10 of this year's most promising housing markets for 2012. 

Location: Pittsburgh
Price: $299,900
Beds/Baths: 3/2
Sq. Ft.: N/A

MSN Real Estate lists Pittsburgh as one of the best housing markets in the U.S., pointing out that the steel town suffered practically no price decline following the housing bust and that its prices are projected to begin gaining ground relatively soon. 

This brick colonial typifies the sort of deal that you can expect to find on the higher end of Pittsburgh's market.  

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Like many Northeastern homes, its interior has a bit of an Old World feel

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Location: Worcester, Mass. 
Price: $300,000
Beds/Baths: 4/3
Sq Ft: 2,730

Tech companies are driving job growth in Worcester, according to MSN Real Estate. That may help real estate prices, which slipped 3 percent this past year, but are expected to tick up 2 percent in 2013. 

Spanning a generous 2,730 square feet, this alternatively colored home was built in 1987 and is equipped with its very own "game room," according to the listing. 

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The home features hardwood floors and a well-equipped kitchen, with ample cabinetry. There's also a sliding glass door that leads to a porch overlooking the back yard.

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Location: Kansas City, Kan. 
Price: $199,000
Beds/Baths: 4/3
Sq. Ft.: 2,123

Realtor magazine ranks Kansas City, Kan., as the most promising housing market of 2012. HousingPredictor, which the magazine used for its rankings, estimates that the Midwestern city will see its real estate prices appreciate by 5.8 percent in 2012. 

Priced at $94 a square foot, this four-bedroom delivers everything you need.

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Pictured here is the home's generously sized kitchen. 

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Location: Topeka, Kan. 
Price: $429,000
Beds/Baths: 5/5
Sq. Ft.: 4,782

Kansas seems to have fared better than most through the real estate storm. Another one of the state's major cities, Topeka is predicted to post the second-highest increase in real estate prices, according to Realtor magazine.

Here is a sprawling home in Topeka, one of the ritzier houses in town. The $429,000 home offers five bedrooms and 4,782 total square feet. 

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The home comes with a large living space bathed in sunlight through its giant windows. 

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Location: El Paso, Texas
Price: $525,000
Beds/Baths: 5/4
Sq. Ft.: 3,767

El Paso is one of a host of Texas real estate markets that have fared well during the housing crisis. HousingPredictor projects a 3.2 percent increase in home prices this year. 

This groovy, fortress-like new traditional is priced at $525,000.

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The interior has a slick modern feel. Texas chic, if you will. 

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Location: Huntington, W.Va.
Price: $175,000
Beds/Baths: 4/3
Sq. Ft.: 1,804

On the hunt for new digs in a market that's turned the corner of the housing slump? Look no further than Huntington, W.Va. HousingPredictor expects the town's real estate prices to climb by 4 percent this year. 

Throw down $175,000 for this handsome 1/3-acre property, and enjoy a thoughtful interior as well as verdant surroundings. 

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Sink your teeth into this kitchen.

Want tips on how to master real estate photography? Read some tips from a pro

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Location: Charleston, W.Va. 
Price: $349,000
Beds/Baths: 4/3
Sq. Ft.: 3,716

Charleston clocks in at third on Realtor magazine's rankings of this year's most promising real estate markets. HousingPredictor expects a 4.5 percent increase. 

Search this town and you may find yourself mulling a neat property like this 3,716-square-foot four-bedroom. 

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The home offers elegant decor with dark hardwood floors and arched doorways. 

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Location: Bismarck, N.D. 
Price: $493,500
Beds/Baths: 3/6
Sq. Ft.: 3,089

Bismarck, N.D., is also expected to perform well in the real estate market this year. HousingPredictor estimates a 3.6 percent increase in home prices there.

This home's exterior reminds us that along with some serious deals there's a tradeoff: You're going to have to cope with some very harsh winters. 

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Don't expect to have to walk very far for a restroom in this home: Its bathroom-to-bedroom ratio is 2 to 1. 

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Location: University Place, Wash. 
Price: $439,090
Beds/Baths: 3/2
Sq. Ft.: 2,058

A tip of the hat to DailyFinance for directing us to Tacoma, Wash., a city whose real estate prices are set to skyrocket, according to a Fiserv prediction. The financial services information provider projects that prices in Tacoma will jump a staggering 24.9 percent. 

Located in University Place, a suburb just outside of Tacoma, this listing offers a taste of the sort of homes that may benefit from the price boom. 

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Constructed just a year ago, the home is practically brand new. Pictured here is the house's chicly lit kitchen. 

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Location: Memphis, Tenn. 
Price: $635,000
Beds/Baths: 5/6
Sq. Ft.: N/A

Fistserv also ranks Memphis, Tenn., as one of the most promising real estate markets of the year, predicting that the city's real estate prices will appreciate by 10 percent. 

This pricey home will bring you an acre of lush land, plus a down country five-bedroom that dates back to the 1950s. 

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The contemporary delivers a pool, some woodland and a colorful interior. 

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