Best Cities for Trapped Homeowners

And even as prices are in free fall, many buyers don't think the bottom is in sight, and are staying away as a result, says Doug Duncan, chief economist at Fannie Mae.

In fact, the country's sluggish sales rate has the NAR lobbying Congress for $50 billion in subsidies for lower mortgage rates in order to stimulate transactions, despite the fact that 30-year fixed mortgage rates average 5.76 percent, according to Bankrate.com--that's almost a 30-year low.

Behind the Numbers

To find the cities best for the distressed homeowner of less than a year, Forbes.com examined the country's 165 largest real estate markets. Using data from Zillow.com, pulled from multiple listing services and local property records, we ranked each city by the number of homes sold by owners after less than one year of occupancy. We then eliminated cities where more than 50 percent of sales were the result of foreclosure. What remained were cities where homeowners who bought at the peak could make a deal to sell their homes--a small consolation, but an important one.

Homeowners looking to bail on speculative purchases in Tennessee have been able to find buyers at a rate that's better than most in this situation. In Memphis, 31.6 percent of homes sold had less than one year's occupancy; in Jackson, the rate was 27.5 percent. Overburdened residents' ability to get out of mortgages quickly--even at a loss--means fewer foreclosures, and is a sign that there are buyers out there.

"Every market is a little bit different," says Jonathan Miller, president of Miller Samuel, a Manhattan-based real estate appraisal firm. "But while faster sales don't necessarily mean a bottom is around the corner, it is a significant reversal."

But California cities dominate the list, accounting for five of the 10 spots ranked. Buyers searching for steals have returned to that state's markets with force. In Sacramento, San Diego, Los Angeles and San Jose, transactions have exploded by 100 percent, 90 percent, 87 percent and 55 percent, respectively, in year-over-year terms, according to Radar Logic. Unfortunately for sellers, buyers are nabbing properties at rock-bottom prices, which often result in homeowner loss.