MIT economist measures how much foreclosures lower housing prices

Original source: SimoleonSense.com .

Tread lightly I’m not sure about the methods used in this analysis…

Introduction (via Phys Org)

Foreclosed homes dot the American landscape — they make up about one in 12 houses with under $1 million left on the mortgage. These foreclosures drive down home prices, both because they add to the housing supply and because the financial firms that acquire the houses want to unload them promptly.

Now, in a recent working paper, MIT economist Parag Pathak and two Harvard researchers, John Y. Campbell and Stefano Giglio, have put a price tag on foreclosures. Specifically, they’ve determined how much a foreclosure dents a home’s value, as opposed to a home going on the market because the owner has died or declared bankruptcy. Moreover, they’ve demonstrated how much foreclosures depress the prices of the houses around them, a finding that should capture the attention of home-owners and policy-makers.

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