Those appear to be load-bearing 2x4s.
We have all known for a long time that foreclosed and distressed properties sell at a discount versus non-distressed homes for a variety of reasons. Some are in less than pristine condition, and others are priced to move because the lender wants to dump the property. Whatever the case may be, they also force sellers of non-distressed properties to drop their prices in order to compete with their low prices, and they cause home values to drop just by virtue of adding to the housing supply.
Today MITnews published an article by Peter Dizikes that quantifies the effect foreclosed homes have on other home prices. According to the article, one in 12 homes with mortgages under $1 million are in foreclosure. The article cites a study “Forced Sales and House Prices” by MIT researcher Parag Pathak, and Harvard researchers John Campbell and Stefano Giglio. After studying 20 years of data from the Massachusetts real estate market, the researchers determined that a foreclosure knocks 27 percent off of the value of a home.
The researchers found this to be in stark contrast to other types of forced sales, such as death or bankruptcy. Those types of forced sales only reduce the value of a home from 3 to 7 percent. The study determined that the difference in price is due to foreclosed homes typically being in poor shape compared to other homes on the market.
The study further finds that the value of a house near a foreclosure drops 1 percent if it is within 250 feet of the foreclosed house. I actually found this somewhat surprising, as I thought the decrease in value would be more than that.
This is the first study I have come across that scientifically quantifies the effect that foreclosure has on property values. While it really only confirms what we all already sort of knew, it is interesting nonetheless, and I recommend taking a look if you have the time.
Loading ...
RSS feed for comments on this post.
Leave a comment