Posted by Rapti Gupta on Mar 12, 2013 10:40 AM EDT

5 American Cities with Cheap Home Prices

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If you are looking to buy a home but are worried about the budget, here is your answer- buy distressed property. (Photo : Reuters)

If you are looking to buy a home but are worried about the budget, here is your answer- buy distressed property.

In the wake of a global economic recovery, the real estate market of the U.S. is on a steady rebound. Home prices are soaring more than ever in every region.

According to data released by a real estate research firm, RealtyTrac, it was observed that around 43 percent of the home sales in 2012 was contributed by foreclosure sales. The increase was furthermore fuelled by a discount on short sales and foreclosures.

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MarketWatch has compiled a list of cities offering the cheapest foreclosed or distressed properties on sale. Here is the list:

Santa Barbara, California

The average short sale price in Santa Barbara is around $283,285. The city had the biggest increase in short sale prices accounting for a 107 percent hike in the fourth quarter of 2012. The average discount on distressed property was around 43 percent in the city. The discounts would have been larger if there were no bidding wars among prospective customers. Therefore, Santa Barbara offers the cheapest distressed homes.

Las Vegas, Nevada

The sin city, Las Vegas, was ground zero when the housing bubble burst in 2007. However the number of short sales and foreclosures in the city has risen lately and experts predict that more houses are to be added to the "distressed property" list as around 8000 homeowners are currently under water. The average short sale price in Vegas is around $124,555 and the average discount is around 33.4 percent on the properties.

Charlotte, North Carolina

Bank foreclosed properties went up by 109 percent in Charlotte in the fourth quarter of 2012. Experts believe that the city's real estate market has a lot of potential as people are moving to less expensive cities from the costlier ones like New York and Boston. The average bank owned sale price on foreclosures amount to around $111,260 with a 43 percent average discount rate.

Cleveland, Ohio

Foreclosures were largely the main boosters for home sales in Cleveland. In the fourth quarter of 2012. Foreclosed property sales rose 141 percent, the largest hike in the country. The average foreclosure sale price is around $57,782, while the average discount is around 56 percent.

Phoenix, Arizona

Short sale purchases in Phoenix rose 43 percent in the fourth quarter of 2012.  Currently phoenix has 3700 short sale listings. The average short sale price is around $149,094 and the average discount on these listings is around 38 percent.

However, buying foreclosed properties requires a lot of planning and patience. Short sale approvals take time to be processed. Moreover, you also need to consider the amount of repair work that goes into the renovation of a foreclosed property.

Check out the best real estate markets of 2013 in the U.S. here.

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