What happened to gut the housing market so dramatically? Throughout the nation, financial decline in industry has destroyed housing prices in geographic centers of those industries. You can credit the big three automakers—or “small three”—with the most dramatic and largest geographic area of decline. The Rust Belt, once home to steel mills and plants associated with MoTown, has plummeted in population. As the automaking and steel industries declined, the Rust Belt paid the price.

Other industries across the nation are also feeling the pinch. When the industries decline, jobs dry up and homeowners either move away or lose their homes to foreclosure. The empty homes can be good deals for savvy buyers who know exactly what they’re getting into. But there’s usually some kind of catch to these deals, so buyer beware.

Detroit

Out of more than 6,000 Detroit residential listings at Realtor.com, just 3 percent cost more than $20,000. Crime problems and the collapse of the American automakers has left many parts of Detroit a wasteland and sent the housing market plummeting. A Detroit real estate agent called parts of Detroit “urban prairie.” Aside from the dangerous neighborhoods and dilapidated conditions of most of these houses, there’s another catch: any buyer must bring the property up to compliance with the Detroit housing code or face enormous fines from the city. If you’ve got deep pockets, are prepared to renovate the property and no fear of violent crime, Detroit properties could be for you.

Cleveland, Ohio

Like most states in the Rust Belt, Cleveland was hard-hit by the devastation of the U.S. auto industry. The City of Cleveland estimates that 10,000 houses in the city, or 1 in 13 houses, are vacant. The city’s population has fallen off steadily since the 1960s and the decline of American steel mills. The Cleveland city government demolishes 1,000 houses a year to prevent blight from setting in. If you’re really tough, look for bargains in the Industrial Valley, Youngstown and Kinsman neighboorhoods.

Bethlehem, Pennsylvania (and surrounding areas)

Although the steel industry in Pennsylvania has been hurting for decades and the population has begun to move on, the housing market hasn’t fully bounced back. Any Rust Belt town with heavy losses due to steel or automotive manufacturing is a good place to look for deals.

Gary, Indiana and Chicago, Illinois (and surrounding areas within 50 miles)

The former home city of President Obama and its neighbor in Indiana are both suffering from high crime and Big Three-related blight. Neither have fallen below $1,000, but may in the near future if local industry continues to drop and crime to increase.

Indianapolis

Indiana is another Rust Belt state in decline. In Marion County, Indiana, the county containing the state capitol of Indianapolis, one in every 254 homes was in foreclosure as of February 2009. The Indianapolis Business Journal advises buying and holding rather than hoping to make a quick profit with “house flipping,” as many potential renters or buyers still can’t afford market prices.

Las Vegas (and surrounding areas)

Nevada has the most foreclosures of any state in the U.S. The hot housing market of the past few years led to unsustainable growth, overstocking builders and overstretched buyers. If you’re a gambling type who knows when to fold ‘em, you might be able to get a deal near Las Vegas.

Ann Arbor, Michigan (and surrounding areas)

All of Michigan has taken huge hits from the auto industry’s demise. University-centered Ann Arbor is not exempt. Houses with huge square footage have reached incredible lows as overstocked builders scramble to empty their inventories. This could be one spot where there’s no catch involved.