Foreclosure Contagion and REO Versus Non-REO Sales
27 Pages Posted: 16 Mar 2010
Date Written: March 15, 2010
Using ZIP code-level data on foreclosure rates, distressed and non-distressed sales in Chicago, Illinois we examine the REO discount. We find significant differences in the difference 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
JEL Classification: G21
Suggested Citation: Suggested Citation