Digital News Report – According to economists at Harvard University and the Massachusetts Institute of Technology, foreclosed homes had a reduced home sale price by 27 percent on average. To make matters worse, the neighboring houses also lose value on their home sale prices with decreases in home sale prices of 1 percent if they live within 250 feet of the foreclosed home. The research study on home foreclosure pricing will be published in the upcoming issue of the American Economic Review journal.
The economists came up with these numbers by looking at 1.83 million Massachusetts home sales from 1987 to 2009. The research also turned up other declines in housing prices from other kinds of forced sales. If a home was sold after the owner died the house price declined around 5 to 7 percent on average. If a homeowner declared bankruptcy, the house sale price declined around 3 percent on average.
The researchers said that foreclosed properties in unsafe neighborhoods had a higher loss of house sale price because there was an increased risk for vandalism and damage to the home when it sits unoccupied.
The Obama administration has been trying to stabilize the housing market and slow down the amount of housing foreclosures with the government home loan modification program called Home Affordable Mortgage Program (HAMP). Homeowner’s that are eligible can apply to participate in the home loan modification program for free. The homeowner works with their existing lender to refinance their mortgage interest rate, forgive loan principal, and to extend the repayment terms as ways to lower their monthly mortgage payments. The goal is to get the home loan mortgage payment under 31 percent of a homeowner’s monthly income. To find out more about the HAMP program you can visit the government’s website at MakingHomeAffordable.com.
By: Victoria Brown