Formerly middle-class homes in decaying neighborhoods are going cheap in foreclosure auctions, but the cost of renovations is likely to exceed the purchase prices.

In an era when million-dollar houses are no longer exceptional, some homes sell for less than the price of a Brooks Bros. suit.

At an April auction of foreclosed real estate in Pittsburgh, Monte Lowderman struggled to entice someone to bid for a two-bedroom house in one of the city's roughest neighborhoods.

"Now, folks, I'm not telling you it's ready to move into," said the auctioneer. He paused, then added: "You know, the way to make money is recognizing potential."

Charles Lantzman, a real-estate investor in Pittsburgh, didn't find the house particularly appealing but put up a hand and offered $500. That turned out to be the high bid.

Nationwide, about 3,800 foreclosed homes sold for $1,000 or less in the first 10 months of this year, according to First American Real Estate Solutions, a data provider in Santa Ana, Calif.

Sales such as these tend to occur in places like Detroit, Cleveland and Pittsburgh, where dying industries have left behind a surplus of what once was middle-class housing in neighborhoods now known for crime and bad schools.

More distressed homes are headed for the auction block. As the national housing boom fades, foreclosures are rising on subprime loans, those for people with weak credit records. A recent report from mortgage analysts at UBS in New York said about 2% of subprime loans packaged into securities this year were in foreclosure by October, nearly double the year-earlier rate.