While Nevada and California are two of the areas hit hardest by foreclosures and dropping prices, New Orleans is seeing such a situation unfold, according to NOLA.com. While not reaching the severity of California or Nevada, the city saw a five-percent drop in home prices over the first half of 2011; the drop is attributed to an abundance of foreclosures and short sales.

Several factors need to be taken into account for New Orleans specifically:

• Too many homes for too small a population.
• 86,000 jobs lost as the result of Hurricane Katrina.
• Few well-paying jobs in the area.

Additionally, the recent closing of the Avondale shipyard, with 5,000 workers laid off, is expected to make an impact.

At the same time, banks attempting to sell foreclosures in the city are finding homes not gutted after being flooded by the hurricane, properties occupied by the previous owners, and no money to rebuild. Short sales, as well, are having an impact on the average price per home and have turned into thorn in the sides of several banks in the area.

While short sales, as we have explained, are only marginally better when it comes to a credit score, the process of selling them and finding a buyer is extremely difficult. According to Mary Vastrola, the manager of Coldwell Banker TEC’s West Bank office: “It takes a lot of patience. It’s paper-intensive. It’s hard to find a buyer who can hang on. If you lose the buyer, you have to start all over again.”

Just what do banks and homeowners need to go through? In New Orleans, as well as in other parts of the country, the bank sells the property at fair market value, and both sides – the bank and the previous homeowner – experience a loss. Finding an owner, as well, is difficult, as a homebuyer may not want to wait several months to purchase and move into a property.

We’ve mentioned a few times on here that potential homebuyers are hesitant to purchase property and, instead, will opt for renting, at least until the job market and economy stabilizes. As a result, residential properties are left empty or are purchased for renting. But, while renting, at least from past experiences, appears to be the financially-sound option, buying ends up being cheaper in a significant amount of U.S. cities, according to CNN Money.

In 74 percent of the nation’s 50 largest cities, purchasing a home costs less than renting and has more perks over time; the only places where renting is cheaper, however, are New York, Sam Francisco, and Seattle. Because of the steep drop in home prices since 2006, a two-bed, two-bath condo or house ends up costing less in the long run. Additionally, low interest rates for 15- and 30-year fixed rate mortgages also make buying more economical at this time.

Some of the best places for buying, however, are those with the greatest drop in prices, such as Las Vegas and Detroit. The market in the gambling mecca dropped 59 percent since 2006, and as a result, the average price for a two-bed, two-bath home is $60,000. Detroit, as well, is another market in which buying is significantly cheaper than renting for the same factors.

At the same time, not everyone should be purchasing a home. A spokesperson for Trulia, quoted in the CNN Money piece, stated: “It’s a personal decision, of course. But if you have a steady job and you are planning to stay for seven years or more and have enough cash to put 20% down and enough left over for seven or eight months of expenses, you’re better off buying in most places.”

So, what factors should you consider? If you’re in a stable financial position, ask yourself how long you plan to stay, how much you need to put down, how much will total homeownership costs be, and if you can claim the tax advantages of homeownership.

The construction industry was hit strongly by the recession, and the lack of new buildings, as well as the need for them, will have a prolonged effect. Currently, new and old properties sit vacant, and as this space is unused, no new construction is needed.

As a result, builders’ confidence levels are still at a nadir, according to a recent survey, and may continue to stay that way. The stagnant nature of the current construction industry, lower prices, and a lack of buyers are three primary factors. Because the economy has recovered without significant job growth, many – unemployed, employed, or underemployed – are not in a position to buy a home. Additionally, potential buyers are more cautious, likely as a result of the volatile state of job growth. According to David Crowe, chief economist for the National Association for Home Builders:

“While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the survey.”

Builders’ sentiments are not without basis, however. As we reported a few months earlier, vacancies in Connecticut, for both commercial and residential properties, have increased since 2000. 100,000 properties were built over the past 10 years, and currently, 32,500 more properties remain vacant compared to 10 years ago.

This figure may continue to stay this way. Although commercial properties have unused office space, residential properties compose a significant amount of the vacancies in the state. Some properties are being bought and rented, as the demand for renting has grown.

Connecticut real estate is not alone. In California, the number of vacant homes has increased 1.4 percent over 10 years, and other cities, such as Detroit and Las Vegas, have large percentage of foreclosures.

Although 2011 was predicted to have the greatest number of foreclosures nationally, the second quarter showed decreases compared to a year ago; Connecticut’s real estate market reflects this trend. Foreclosure filings are down 51 percent compared to a year ago, according to Mansfield Patch, but this is only an overall state trend. Areas with lower job growth, such as the eastern region of the state, still have a greater number of foreclosures, although the amount decreased slightly since last year.

RealtyTrac analyst Daren Blomquist also mentioned that Connecticut’s figures may be artificially inflated as the result of long foreclosure procedures. Connecticut foreclosures use one of two procedures, but the process can take up to 551 days. While figures appear positive, foreclosure filing could increase in the state over the next six to 12 months.

Fairfield County Weekly reported on another foreclosure-related issue in the state – mold. Half of all foreclosed properties in the state could have mold, but buyers have no way of knowing, and agents are not obligated to disclose the condition.

What could be causing this issue? While foreclosures in poor condition are not restricted to Connecticut, such properties have the electricity and heat shut off and are essentially sealed. Moisture, from a leak, may get trapped inside the house, causing mold to accumulate and spread to wood and sheet rock. Mold testing costs $500 in the state, and replacing the infested materials, especially wood and rock, is an additional and significantly larger cost.

If you’re considering purchasing a foreclosure in the state, what should you look out for? First, understand that purchasing foreclosed property is a risk, not only for the mold but also for any additional damage from wear or lack of repair, and a buyer seldom sees the house beforehand. Agents, however, are required to disclose any basement, roof, or humidity problems, and depending upon the information given, you could infer any potential mold issues inside the home.