10 cities where foreclosures still haunt the housing market

  • Andy Dean Photography/iStockphoto

    By Jason Notte/MainStreet

    Foreclosures aren't as big a part of the housing market as they were just after the recession, but they're still a sizable portion of homes sold across the U.S.

    Housing data site RealtyTrac found that sales of properties in foreclosure are down from a year ago to multi-year lows, while year-to-date U.S. home sales in 2015 are at an eight-year high. The sale of properties sold while in the foreclosure process (not including bank-owned properties) accounted for 6.4 percent of all single family and condo sales in July, down from 6.6 percent of all sales in June and down from 8.0 percent in July 2014.

    Meanwhile, the National Association of Realtors found that distressed properties -- including both foreclosures and short sales -- declined to 7 percent of all homes in July from 8 percent in June and 9 percent a year ago. Some 5 percent of July sales were foreclosures, and 2 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in July (15 percent in June), while short sales were discounted 12 percent (18 percent in June). Comparatively speaking, that isn't such a bad thing.

    "Five years ago, distressed sales represented 33 percent of the market in July," said Chris Polychron, president of the National Association of Realtors and executive broker with 1st Choice Realty in Hot Springs, Arkansas. "For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments."

    That doesn't necessarily mean everything is going extraordinarily well. The U.S. median existing home sales price in July was $235,500, up 5.8 percent from a year earlier. While there are fewer all-cash sales driving that rising price, there are still reasons to proceed with caution.

    "While the stock market may be on a roller coaster as of late, the housing market is still on solid ground, with the eight-year low in cash sales combined with the eight-year high in overall sales volume in the first half of the year evidence that housing is successfully transitioning from an investor-driven recovery to one that is drawing in traditional buyers as a good foundation for sustainable growth going forward," said Daren Blomquist, vice president at RealtyTrac. "That's not to say there are no cracks in the foundation of this recovery, the top three of which are housing affordability -- or lack thereof in some high-flying markets -- along with over-dependence on capricious cash buyers -- both foreign and domestic -- in some markets, and the persistent overhang of underwater homeowners who continue to represent heightened default risk given any future economic shockwaves."

    In 61 of the 172 markets RealtyTrac analyzed for in-foreclosure sales, the share of those sales increased from a year ago, counter to the national trend.

    "The increase in overall foreclosure activity over the last five months has been driven primarily by rapidly rising bank repossessions, which in July reached the highest level since January 2013," said Blomquist. "Meanwhile foreclosure starts in July were at the lowest level since November 2005 -- a nearly ten-year low that demonstrates the recent rise in bank repossessions represents banks flushing out old distress rather than new distress being pushed into the pipeline."

    That's good news for much of the U.S. but not for certain corners of it. With help from RealtyTrac, we found the locations where foreclosures still make up a significant portion of home sales, despite improvements in the overall economy. Each has its own story to tell.

    Click ahead to see 10 cities where foreclosures still haunt the housing market.