The Valuation Impact on Distressed Residential Transactions: Anatomy of a Housing Price Bubble

摘要

Most previous empirical studies on foreclosure price discounts are based on data from housing-markets during periods of relative stability (Baton Rouge, Louisiana; Arlington, Texas; and Las Vegas, Nevada in 1980s and 1990s). The few studies with sample periods containing the Liquidity Crisis of 2008 were all focused on the Las Vegas market and even fewer studies have examined the pricing implications of short sale transactions. This study examines the discounts associated with foreclosure and short sale status in the Fresno, California from 2006 to 2010, a time period containing significant housing price volatility. Generally, we find approximately 20 % and 13 % discounts for foreclosure transactions and short sale transactions, respectively. These discounts remain consistent even after controlling for endogeneity of time-on-the-market and self-selection bias. We also document that both the foreclosure and short-sale discounts are time varying based on market conditions. Both foreclosure and short-sale discounts increase from 2008 to 2009 and decrease in 2010. Also, the foreclosure status decreases time on the market while the short-sale status increases time on the market.