Article:

Foreclosure Contagion and REO versus non-REO Sales

Author: Stephanie Y. Rauterkus, Norman G. Miller, Grant I. Thrall, Michael A. Sklarz

Start Page: 307
End Page: 324
Volume: 15
Issue Number:3
Year: 2012
Publication: International Real Estate Review

Abstract:

We examine the real estate owned (REO) discount by using ZIP code-level data on foreclosure rates, distressed and non-distressed sales in Chicago, Illinois. We find significant differences in price between distressed and non-distressed properties in high- versus low-foreclosure rate neighborhoods. We expand this analysis to determine if trends in the REO discount can be explained by trends in foreclosure rates and if this correlation can be used to identify a 'tipping point' in foreclosure rates. We identify key relationships between trends in the REO discount, the proportion of REO sales to total sales, and sales volume.

Keywords

REO; Foreclosure; Contagion

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