Fed: Foreclosures Have Little Influence on Prices of Nearby Homes
Despite conventional wisdom that foreclosed properties negatively impact the values of neighboring homes, a paper from the Federal Reserve Bank of Atlanta reported Aug. 6 that that isn’t the case. In fact, it’s the condition of the distressed property, and not its foreclosure status, that most impacts surrounding home values.
According to the research, any negative effects that foreclosures have on nearby property values tend to peak before distressed properties even complete foreclosure — and in those cases the study revealed reduced values of only 0.5 to 1 percent in most cases. And if the subject property is in good condition, adjacent homes may sell at even higher prices.
Federal Reserve Bank researchers studied housing information in 15 metropolitan areas with a focus on single-family homes. “We find that while properties in virtually all stages of distress have statistically significant, negative effects on nearby home values, the magnitudes are economically small, peak before the distressed properties completed the foreclosure process, and go to zero about a year after the bank sells the property to a new homeowner,” the report stated.
The duration of a foreclosure delinquency also is a factor in maintaining neighborhood prices. The report concluded that in order to maintain home values in a neighborhood affected by foreclosures, it’s important to minimize the time foreclosed homes stay in serious delinquency and bank-owned status. The report noted that a faster foreclosure process is necessary, and that banks should be pressured to sell the properties quickly.
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Foreclosure Externalities: Some New Evidence
Kristopher Gerardi, Eric Rosenblatt, Paul S. Willen, and Vincent W. Yao
Working Paper 2012-11
August 2012
Abstract:
In a recent set of influential papers, researchers have argued that residential mortgage foreclosures reduce the sale prices of nearby properties. We revisit this issue using a more robust identification strategy combined with new data that contain information on the location of properties secured by seriously delinquent mortgages and information on the condition of foreclosed properties. We find that while properties in virtually all stages of distress have statistically significant, negative effects on nearby home values, the magnitudes are economically small, peak before the distressed properties complete the foreclosure process, and go to zero about a year after the bank sells the property to a new homeowner. The estimates are very sensitive to the condition of the distressed property, with a positive correlation existing between house price growth and foreclosed properties identified as being in “above average” condition. We argue that the most plausible explanation for these results is an externality resulting from reduced investment by owners of distressed property. Our analysis shows that policies that slow the transition from delinquency to foreclosure likely exacerbate the negative effect of mortgage distress on house prices.
SOURCE: http://www.appraisalinstitute.org/
Full paper below…
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4closureFraud.org
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Foreclosure Externalities: Some New Evidence
Bernanke deserves to be fired for allowing this type of garbage to be published by the Federal Reserve. And Obama to be impeached for picking such a poor supervisor. since the intent is to influence public policy that is so flawed it is hard to read.
This is BS, I live here, the only reason these people, shall we say in lesser neighborhoods deal with this is because they have been beaten down so much or the came that way or they got that way living in these kinds of neighborhoods and did not leave or could not leave so they do nothing or can do nothing, or they have nothing to do anything with, some of the better neighborhoods, yea.. some speak out and loudly. I got got the hell out of lesser and climbed back up to zero again after 50 odd yrs. Ok.. but my little neighborhood is mostly intact somehow, day by day we hang on. We also are a tight neighborhood which most neighborhoods lack, cohesiveness. Again we have to stick together and care for each other or we loose. I shall not comply with giving it away. Hell I got nothing I am a renter in my own home and a landlord also in what used to be a real deal, property that would appreciate… but will still have faith this crap will clear before I die.
No doubt this “paper” was written by a couple of kids fresh out of college.
As Laura commented, the report is absurd and and lacks common sense. Almost two out of every three completed sales in Metro Atlanta are either short sales or foreclosures. If foreclosures were not driving down prices there would be no need for so many short sales (?).
The foreclosure crisis continues to quietly rage on in Atlanta. From low-end properties to luxury homes the banks are not discriminating and taking/stealing them all. The only discrimination applies to the upkeep of the properties. The banks have a tendency to neglect their duties on the lower-end homes, often not even completing the foreclosure sale. Then again, I have seen bank properties in very nice neighborhoods where the grass has not been cut for months. An individual homeowner would be cited for not cutting the grass and failure to maintain their property would result in massive fines and possibly even jail time. Yet the banks continue to get a pass for shirking their duties.
Like the rest of the nation, the folks in Atlanta have become foreclosure weary. Drive through any subdivision and you will see the signs. It seems that since the national “settlement” the mainstream media has stopped talking about the crisis. The master plan the banks collectively crafted is working perfectly.
Correct the problem. Hold the crooks who caused this accountable. Fixes for fraud are fascism.
Nothing much has changed at the Federal Reserve since that jabbering fool Alan Greenspan led us off a cliff. The report is absurd and defies common sense.
This is certainly the progressive agenda. It tries to distract from the crimes they are committing while they are nailing US to the cross.
Hmm… yeah,.. last time i checked, Pandering to The Banking Industry was still a Bi Partisan Enterprise. I’ll admit the truth of it though,.. i expected More.. WAY MORE, from the current Regime. but the people who are running the country for the last two or three Decades,.. Have sold us out. its pointless to keep up the Finger pointing no matter what party you align yourself with. and I’m thinking only a fool would Believe that the whole “Political Battleground” scene, is Not just a Mountain of B.S. ! to Distract us from the fact that EVERYBODY on Capitol Hill, Has their Sticky Little Fingers in the Honeypot. and MAN, I LOVE IT… when folks start tossing around words like AGENDA, Because I’ve noticed that when people use THAT word in reference to others…. They Invariably Have an Agenda of their own… its not always a bad thing… Just Sayin’.