Editor's note: Clark Howard, the Atlanta, Georgia-based host of a nationally syndicated radio show, is host of a television show designed to help viewers save more, spend less and avoid getting ripped off during these tough economic times. The show airs at noon and 4 p.m. ET Saturdays and Sundays on HLN.
ATLANTA, Georgia (CNN) -- The news on the housing market continues to be bleak as bleak can be. In just one example, the January numbers from the Case-Shiller index -- a popular collection of data about repeat sales of single-family homes -- show that home values in Phoenix are down almost 50 percent from their peak in July 2006.
Clark Howard has bought several foreclosures over the years and has his eye on another.
There are similarly dismal numbers in Las Vegas and Miami (both down more than 40 percent) and San Francisco and San Diego (both down 40 percent).
But you've got to realize that housing stats are skewed by bubble markets such as these, where people were trying to get rich quick on someone else's money.
Yet still, sometimes you can be left feeling like there's no good news in all of this. Well, I have some for you.
Half of all home purchases in February were by first-time homebuyers, according to The Financial Times of London. Those buyers were taking advantage of incredible interest rates and low housing prices, not to mention new tax incentives for first-time homebuyers.
How about you? If you want to get in the game, you've got to look REO -- and I'm not talking about the classic rock band REO Speedwagon!
REO stands for real-estate owned property. It's where you buy directly from the bank after they foreclose on a property. Banks are notoriously bad property managers. It's not uncommon for them to let a property go unloved and neglected for several months.
Before long, the property starts looking like a haunted house on Halloween. The grass is unkempt, the shutters are falling off and windows may be broken. That's when you can really swoop in and steal a deal.
I've bought a number of foreclosures over the years. My most recent purchase was last year, but I'm thinking about buying another foreclosure I saw while filming with my HLN show crew. Watch Clark finding a bank-owned bargain »
I'm particularly a fan of houses that smell! The odors can usually be eliminated very easily. But buyers are quickly turned off by a stinky house, and that means I can really underbid on my offer.
If you want to start looking for REOs in a specific part of town, try finding a real estate agent who farms that area. You can also try searching the web by visiting sites such as HUD.gov, HomeSales.gov, EmailForeclosures.com and Trulia.com.
When searching for foreclosures or distressed property in the single-family home market, be on the lookout for several things: an established neighborhood that's 10 years or older; a neighborhood that is mostly owner-occupied; and a house that is structurally sound with cosmetic damage only.
My rule of thumb has always been that you want to buy 20 percent below fair market value for homes and 30 percent below fair market value for condos.
Speaking of condos, the condo market in particular has a lot of hazards. When you buy a condo, you're buying an obligation and a commitment in a condo association.
Do not buy in a building that has been recently constructed. You want to look for established condo buildings that have been there six years or longer. With established buildings, you know that most people are paying their condo fees.
And finally, remember that foreclosures and REOs are just part of a larger category of "people problem" houses. These are the kinds of houses that sit on the market as wounded ducks because the owners endured job loss, divorce, relocation or any other of a host of troubling scenarios.
The real key to finding a deal is to know the local market conditions where you're buying. Go after the properties that are REOs for 45 days or longer. Lenders are usually unrealistic about the pricing of properties on their books for about the first 6 weeks.
Remember, out of adversity comes great opportunity.