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Forced Sales and House Prices

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  • Giglio, Stefano
  • Pathak, Parag
  • Campbell, John Y.

Abstract

This paper uses data on all house transactions in Massachusetts over the last 20 years to show that houses sold after foreclosure, or close in time to the death or bankruptcy of a seller, are sold at lower prices than other houses. Foreclosure discounts are on average at 27 percent of the value of a house. Moreover, foreclosures that take place within small local geographies of a house lower the price at which it is sold. Our preferred estimate is that a foreclosure at a distance of 0.05 miles lowers the price of a house by about 1 percent.

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File URL: http://dash.harvard.edu/bitstream/handle/1/9887623/Campbell_ForcedSales.pdf
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Bibliographic Info

Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 9887623.

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Date of creation: 2011
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Publication status: Published in American Economic Review
Handle: RePEc:hrv:faseco:9887623

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  1. Christopher J. Mayer, 1998. "Assessing the Performance of Real Estate Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, American Real Estate and Urban Economics Association, vol. 26(1), pages 41-66.
  2. Steven D. Levitt & Chad Syverson, 2008. "Market Distortions When Agents Are Better Informed: The Value of Information in Real Estate Transactions," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 90(4), pages 599-611, November.
  3. Genesove, D. & Mayer, C.J., 1994. "Equity and Time to Sale in the Real Estate Market," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 94-02, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, American Economic Association, vol. 79(1), pages 125-37, March.
  5. Case, Bradford & Quigley, John M, 1991. "The Dynamics of Real Estate Prices," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 73(1), pages 50-58, February.
  6. Kristopher Gerardi & Adam Hale Shapiro & Paul S. Willen, 2007. "Subprime outcomes: risky mortgages, homeownership experiences, and foreclosures," Working Papers, Federal Reserve Bank of Boston 07-15, Federal Reserve Bank of Boston.
  7. Efraim Benmelech & Mark J. Garmaise & Tobias Moskowitz, 2004. "Do Liquidation Values Affect Financial Contracts? Evidence from Commercial Loan Contracts and Zoning Regulation," NBER Working Papers, National Bureau of Economic Research, Inc 11004, National Bureau of Economic Research, Inc.
  8. John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," NBER Working Papers, National Bureau of Economic Research, Inc 1885, National Bureau of Economic Research, Inc.
  9. Shleifer, Andrei & Vishny, Robert W, 1992. " Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, American Finance Association, vol. 47(4), pages 1343-66, September.
  10. Springer, Thomas M, 1996. "Single-Family Housing Transactions: Seller Motivations, Price, and Marketing Time," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 13(3), pages 237-54, November.
  11. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens III, 2008. "Housing Externalities," NBER Working Papers, National Bureau of Economic Research, Inc 14369, National Bureau of Economic Research, Inc.
  12. Roll, Richard, 1984. " A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market," Journal of Finance, American Finance Association, American Finance Association, vol. 39(4), pages 1127-39, September.
  13. Leigh Linden & Jonah E. Rockoff, 2008. "Estimates of the Impact of Crime Risk on Property Values from Megan's Laws," American Economic Review, American Economic Association, American Economic Association, vol. 98(3), pages 1103-27, June.
  14. David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," NBER Working Papers, National Bureau of Economic Research, Inc 8143, National Bureau of Economic Research, Inc.
  15. Donald P. Morgan & Benjamin Iverson & Matthew Botsch, 2008. "Seismic effects of the bankruptcy reform," Staff Reports, Federal Reserve Bank of New York 358, Federal Reserve Bank of New York.
  16. Charles W. Calomiris & Stanley D. Longhofer & William Miles, 2008. "The Foreclosure-House Price Nexus: Lessons from the 2007-2008 Housing Turmoil," NBER Working Papers, National Bureau of Economic Research, Inc 14294, National Bureau of Economic Research, Inc.
  17. Meese, Richard A & Wallace, Nancy E, 1997. "The Construction of Residential Housing Price Indices: A Comparison of Repeat-Sales, Hedonic-Regression and Hybrid Approaches," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 14(1-2), pages 51-73, Jan.-Marc.
  18. Harding, John P. & Rosenblatt, Eric & Yao, Vincent W., 2009. "The contagion effect of foreclosed properties," Journal of Urban Economics, Elsevier, Elsevier, vol. 66(3), pages 164-178, November.
  19. Mayer Christopher J., 1995. "A Model of Negotiated Sales Applied to Real Estate Auctions," Journal of Urban Economics, Elsevier, Elsevier, vol. 38(1), pages 1-22, July.
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