I'm going to be blunt. I don't want another overseas location, I want another America or Canada setting. Preferably in the Pacific Northwest and/or Northern California.
I can say from living in Washington State, the PNW seems like great location for a game like this. This place is pretty diverse geographically; two mountain ranges (in Western Washington anyway), Western Washington/Oregon's coast, forests, and mountains plus Eastern Washington's plains, gorges and canyons, then there's Seattle and Portland. I haven't played a Forza Horizon before, but this looks like something I can really get into; I spend most of my time in GTA driving a car around San Andreas, so this seems like it fits right up my alley. I always wanted to see the PNW in GTA, but the region would work much better with Horizon instead.
The Pacific Northwest would work like Colorado in Forza Horizon 1. They're both heavily underused locations in games and they're both incredibly diverse and rugged - great for winding roads. The South of France is too but clearly they goofed in Horizon 2. Like they couldn't have f*cked up any more. But I digress. The PNW is beautiful I know that place like the back of my hand and absolutely love it.
They should do it. And if they did do it, they should combine Oregon with Washington, divided by that beautiful Columbia River and it's magnificent scenic freeway spanning from east to west.
One thing though. Better rain textures, way better reflections and more diverse weather systems are much needed.
The Pacific Northwest like Northern California-Oregon and Washington were loosely based in Need For Speed Hot Pursuit in 2010, though I want to see Oregon-Washington coast in the game.
Here's some cool locations
Oregon-Washington Coast (The picture below is Oregon, but you'll get the idea)
Monterey County , CA - A NorCal County, north of San Luis Obispo. I think NFS Hot Pursuit (2010) used this bridge as a location in it. Also Monterey was used in NFS Hot Pursuit 2 (Just a fun fact). It is sorta similar to Oregon-Washington Coast, only that Monterey County has a pretty interesting car scene like in Pebble Beach where golfers also play and Mazda Laguna Seca. This county also has a few nice small cities, yet one big city, maybe bigger than Nice in Forza Horizon 2 (The city I am referring to is Monterey, not the largest, but pretty big, also has 4 other surrounding cities like Del Rey Oaks and it's airport, Seaside, Pacific Grove, & Carmel-by-the-Sea. They can also add in the famous 17 Mile Drive.
- Japan - The idea is quite possible for next installment, but I'm not a big fan of Japan, I just don't find it interesting
- Thailand - Don't hate me on this, but Thailand has a pretty big car scene
- Hawaii - Actually, this makes sense because Hawaii has an actual car festival like Wekfest Hawaii. It would also be cool to travel from one island to another, also the Hawaii Belt!
- Palm Springs-Palm Desert Region - You might be like "Ugh another desert location? That's pretty stupid." However, places like Coachella Music Festival in Coachella, CA fits in well with Forza Horizon series. Also, Palm Springs was in Top Gear (useless, but I've actually stayed in the same hotel they stayed in when they crossed the Salton Sea area). Palm Springs of fictitious version could held a car festival there and Coachella can too, cities around it have their own kind of Horizon festival
- Skyline Drive Region - This place is really beautiful, just full of meadows in the East Coast. Skyline Drive is located somewhere around Virginia.