If you were searching for pockets of optimism in the US housing market, where would you look?

Easy guesses would be to avoid Detroit, Cleveland or any cities with domestic automobile plants or troubled manufacturers.

Then there are the foreclosure gulches of Central and Southern California, which include the Modesto, Stockton, Bakersfield, Riverside and Sacramento areas. Those cities will take a long time to recover. Too many homes there were sold at bubble prices to people with dodgy finances.