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Top housing markets best to avoid

The Nevada housing market has experienced a significant drop in home values since the onset of the housing crisis.

The Nevada housing market has experienced a significant drop in home values since the onset of the housing crisis.

Before consumers decide to rent a moving truck and venture into a new home, it is important they investigate the local housing market. Housing prices are at extremely low levels due to the weak economy and low consumer confidence.

But some local housing markets are showing signs of strength, indicating a home purchase in these locations could lead to a higher return on investment. Some markets, however, are showing no sign of recovery, and potential homebuyers could find themselves stuck in these locations if they do not avoid them early. Investopedia recently identified the worst U.S. housing markets, which include Nevada and Arizona.

According to the source, the Nevada housing market leads the nation in the number of underwater mortgages, with six out of 10 homeowners in the state owing more on their home loans than their house is currently worth. The state's homes ran up higher values than the national average just before the housing crisis hit, and now they are seeing home prices down 59.4 percent from their peak during the boom. Trulia reported the median home price in the state is currently $142,500.

Similarly, the housing market in Arizona has experienced a 51.7 percent drop in property values from the market peak in 2008, leaving 49 percent of Arizona homeowners with underwater mortgages, the source reported. The average Arizona homeowner has a negative equity value of $60,000, significantly higher than the state's median income of $48,745. A report from the Federal Housing Finance Agency expects the Arizona housing market to continue to drop, as home prices have dropped an average of 4.6 percent between the first and second quarter of 2011.