Massachusetts, like the rest of the U.S., has been hit hard by the housing market crisis, with foreclosure rates and cheap homes for sale in the state continuing to produce relatively high numbers when compared with previous years. However, the true impact on the residential property industry of homes being sold cheaply and homes getting foreclosed on has yet to be quantified until now.
A study has provided an exact figure that represents the loss the housing market suffers due to foreclosed homes for sale in Boston, MA and in other areas of the state. A group of researchers from the Massachusetts Institute of Technology and Harvard University has revealed that 27% is lost when a foreclosed dwelling is sold compared with homes sold through other reasons and under different circumstances.
The study used data on almost two million house sales in the state, including Massachusetts foreclosure homes, during the period 1987 to 2009. The aim of the study, researchers have explained, is to look into the real effect of foreclosures on the average selling price of nearby dwellings.
Based on the results, researchers claim that foreclosures can create more cheap homes for sale within the same neighborhood. They explained that if a foreclosure happened within about 250 feet of another home, that neighboring property, when sold a year after the foreclosure of its neighbor, will experience a decline in selling price.
They estimate the impact of foreclosures on neighboring properties' home value at 1.1%; which means that for people buying a foreclosed home or a new dwelling, they can acquire the neighboring property of a foreclosed residence at a price that is 1.1% less than it would have sold had there been no foreclosure nearby. If all homes near a foreclosure are taken together, researchers estimate the loss of value to be $140,000 in 2008.
The authors of the study stated that the results show that Massachusetts is not exempted from the impact of the housing market crisis and from the high rates of foreclosures. According to them, most people automatically think of Phoenix or Nevada when they hear foreclosure, but the problem is also present in Massachusetts, particularly in urban areas where most cheap homes for sale are results of foreclosures.
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