Woodbridge, Va., a 40,000-person, Washington D.C., suburb called the outer beltway by locals and real estate brokers, is a perfect model of that regions housing boom and bust.

The city’s population grew by 27% from 2000 to 2007, as residents flocked to the affordable housing, quiet tree lined neighborhoods and local parks available there.

Home sales then spiked, and transactions doubled between 2003 and 2005 -- to 2,000 a year, according to Trulia.com.

But what was done quickly just as rapidly came undone. Prices are now down 40%, and transactions have halved from peak levels. It seemed Woodbridge was destined to host vacant, foreclosed properties.

Only that hasn’t happened. The local housing market is bouncing back as buyers search for deals. In fact, its transaction rate has returned to 2005 levels. The swell of adjustable-rate-mortgages and subprime, adjustable-rate loans in Virginia defaulted at 23%, one of the higher rates in the country, according to the Mortgage Bankers Association. That landed towns like Woodbridge in trouble, but it’s now showing positive signs of correction, even if the average price of foreclosed homes -- currently $213,416, down from a high of $333,900 a year ago -- are still depressed.

“Looking at the prices, I cant believe how cheap they are in the places people are starting to buy them up,’ says Cullen Watson. a Washington D.C., real estate attorney. “That’s good for them, at least they're hitting bottom.’

In Depth: Americas Post-Subprime Boomtowns

Woodbridge joins Murrieta, Calif., Queen Creek, Ariz., and Port St. Lucie, Fla., on a list of towns that have been ravaged by sub- prime mortgages and foreclosures but where buyers are returning the market. Using data from RealtyTrac, an Irvine, Calif. -based foreclosure listing firm, we examined every U.S. town with a population under 100,000 to identify places where purchases of foreclosed properties have surged most in the last year to get a sense of the towns in which buyers are investing.

Best Bets

Though these places are foreclosure-rich, buyers view them as good long-term bets. In the D.C. metro area, its because of the area’s enviable unemployment rate, the lowest in the country, according to the Bureau of Labor Statistics. In markets that overheated, such as those in California, its because house prices have finally dropped into line with incomes for the first time since the late ‘90s.

And while foreclosure sales may look like a silver lining instead of something encouraging, consider that there are plenty of foreclosure areas where buyers have not come back into the market. Take Kissimmee, Fla. Hit hard by foreclosures, the towns prices are down 25% this year, according to Trulia. It ranks 465th nationally in the number of foreclosure sales, a sign that prices still have a long way to go before buyers view it as a good buy.

Subprime loans caused a lot of these foreclosures, socking housing markets across the country. According to the Mortgage Bankers Association, a trade group in Washington, D.C., 19.5% of subprime loans have fallen into foreclosure, with that figure as high as 30% in Florida and 25% in California. In many of the exurbs most affected, buyers have not returned.