New Study Shows Foreclosures Don’t Affect Housing Prices As Much as Previously Reported

Atlanta, GA- Recent reports have said that the large number of distressed homes is dragging down the price of homes. But a new study conducted by the Federal Reserve Bank of Atlanta shows that foreclosures don’t have an adverse effect on housing prices, according to a story in The Wall Street Journal.

The study examined housing prices in 15 metropolitan areas that have faced high foreclosure rates and came up some surprising conclusions.

The Federal Reserve contends that it is the condition of the home that has an impact on the value of the property instead of the finality of the foreclosure process.  The negative effect on home prices actually peaks just after a property enters the process.

Once the foreclosure process is complete, if the home is in below-average condition it will drag down the prices of homes in adjacent areas. When a home is in average or above-average condition home prices are not affected.

According to the study, homes that are delinquent for a year or less, or are now possessed by the bank lowers home prices within a tenth of a mile only by .5 to 1 percent.

The authors of the report wrote, “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.”

Foreclosures which are drawn out over a long period of time are actually weighing on home prices more than the actual bank seizure. Still people don’t want to lose their homes and can certainly challenge a default notice by hiring a foreclosure attorney.