Before the recession set in, property values were at or near all-time highs throughout most of the country. Over the past two years, however, homeowners and real estate investors have seen prices fall dramatically, largely due to the increase in foreclosures that followed the housing bubble burst and the sub-prime lending fiasco. As we try to rid the economy of toxic mortgages and dig our way out of excessively high unemployment numbers, all homeowners are suffering the consequences as real estate markets throughout the United States are reporting steep declines in value.

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Lately, despite more foreclosures and an unemployment rate that remains high, signs of life are emerging in the global economy and the United States real estate market. According to RealtyTrac, which tracks foreclosure activity in the United States, a slowdown in foreclosure activity has finally begun.

Which states have fared best in recent months? RealtyTrac's February 2011 foreclosure report provides some interesting insight into the markets that have best weathered the storm of foreclosure activity and rebounded in recent months.

1. Vermont
Maybe there's something in the maple syrup. With a foreclosure rate of 1 in every 62,849 homes, Vermont has continued its trend of decent numbers despite the perils of the recession. Vermont's low foreclosure rate is partially thanks to stringent state laws that protect homebuyers in case of mortgage default. Additionally, the state's unemployment rate has recently hovered around 6%, a far cry from the 10% nationwide unemployment rate. With more citizens working, Vermont's population has been able to keep up with more mortgage payments, contributing to a relatively strong real estate market. (For more, see Take Advantage of a Housing Crisis- Rent!)

2. West Virginia
West Virginia is rebounding well and, like Vermont, its housing market has been fairly stable through the recession. In recent months, the rate of foreclosure in the Mountain State has hovered around 1 in 22,344 homes.

There has been a great deal of speculation as to the reason West Virginia's real estate market has fared so well though the recession. Many experts believe that West Virginia's fairly low average wage and fiscally conservative outlook led to fewer sub-prime and adjustable rate mortgages than other states saw. Traditional lending practices prevailed, and West Virginians did not buy more than they could afford, so residents of the Mountain State could keep up with their mortgage payments when the economic downturn hit.

One interesting thing to note is that in 2005, West Virginia boasted the highest home ownership rate in the nation, with 81.3% of residents counted among the ranks of homeowners. The strength of traditional lending practices and the state's fiscal responsibility helped keep West Virginia's real estate market on track and allowed many of its citizens to hold on to their homes.

3. North Dakota
North Dakota has the third-lowest foreclosure rate in America; it currently stands at 1 in every 9,307 homes. It is one of the many midwestern and western states that have generally made it through the foreclosure crisis with minimal fallout. North Dakota's success is mostly due to the same factors that kept West Virginia in good shape.

North Dakota insulated itself from the rampant real estate speculation that was predominant during the early 2000s. While investors in most states abandoned traditional home buying practices in favor of speculative investing, home "flipping" was relatively unheard of in the Dakotas, and it shows in the housing market's impressive stability. (For more on housing bubbles, see Why Housing Market Bubbles Pop.)

4. Wyoming
The Cowboy State currently has a foreclosure rate of 1 in 4,022 homes, putting it solidly in fourth place for foreclosure rates in February 2011. Like North Dakota, Wyoming was also largely immune from the mortgage crisis, since sub-prime and jumbo loans were rare.

Wyoming is one of few states whose economy grew slightly during the recession. Mining expanded and public projects contributed to growth despite the trouble nationwide. Like the rest of the country, they've endured economic difficulties, but with an unemployment rate that has remained around 7%, Wyoming has stayed stronger and recovered more quickly than most states.

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5. South Dakota
Like its neighbor to the north, South Dakota has one of the lowest rates of foreclosure in America: 1 in every 3,619 homes. South Dakota's real estate market has seen a big boost in recent months, largely because the state followed the example set by neighbors like Wyoming and North Dakota. South Dakota has the advantage of robust mining and agriculture industries, which kept its unemployment rate around half of the national rate. The current unemployment rate in South Dakota is a fantastic 5.4%. (For more on real estate rebounds, see 8 Signs Of A Real Estate Rebound.)

Meanwhile, in the Other 45 States
These five states stand out, but what does their news mean for you if you live in one of the other 45? Even if you're paying your mortgage on time and don't plan to move, statistics across the nation still matter to you as a homeowner because they're major economic indicators and they have a strong influence on your own home's value.

The good news for homeowners is that these five states reflect a broader trend, namely that foreclosures are starting to decrease across the country and housing prices are beginning to stabilize. Moreover, there are signs that the other 45 states are also starting to make rebounds in their unemployment rates as the economy and local businesses begin to pick back up. So if you're down right now, hang in there. In the next few years, there is some strong potential that the value of your home will begin to rebound. (For more on foreclosures, see Foreclosure on High Housing Prices.)

The Bottom Line
When you're looking to sell or buy a home, you have plenty of numbers to look at. Although you might focus on the nearby property values and local taxes, you can't afford to ignore big-picture economic indicators like the foreclosure rate. These statistics provide a great deal of insight into the long-term economic health of the underlying economy, making it a little easier to make your relocation decisions or plan your strategy for selling or buying a home.

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