Plse. note- prices are trending downward not up !
A much higher discount on Foreclosure homes than occurs with other types of forced sales, according to a recent study that will be published in the American Economic Review.
When a house is sold after the death of an owner, the price drops an average 5% to 7%, according to the study. When the owner declares bankruptcy, it falls 3%.
“It’s not surprising that there is a discount due to foreclosure,” Parag Pathak, a Massachusetts Institute of Technology economist and author of the report, said in a news release. “But it is surprising that it’s so large.
Also, the value of a home within about 250 feet of a foreclosure drops 1%, the study found. The study was based on 1.8 million home sales in Massachusetts from 1987 to 2009.
One reason foreclosures are so steeply discounted likely has to do with their condition; often, these homes are not maintained.
But even without visible deterioration, the discount on foreclosure homes can affect neighborhood prices, Pathak said. “A home-buyer’s benchmark [for a fair price] will usually include houses in the same neighborhood,” Pathak said, causing local values to drop even without signs of blight.
