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

Posted: 12 Jul 2014

See all articles by Ramya R. Aroul

Ramya R. Aroul

University of Texas at Arlington - Department of Finance and Real Estate

J. Andrew Hansz

E.V. Williams Center for Real Estate

Multiple version iconThere are 2 versions of this paper

Date Written: July 10, 2014

Abstract

Most previous empirical studies on foreclosure price discounts are based on data from housing-market 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 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.

Keywords: Short sale; Foreclosure; Distressed sales; Real estate valuation; Central California; Hedonic model

Suggested Citation

Aroul, Ramya R. and Hansz, J. Andrew, The Valuation Impact on Distressed Residential Transactions: Anatomy of a Housing Price Bubble (July 10, 2014). Journal of Real Estate Finance and Economics, Vol. 49, No. 2, 2014 (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2464573

Ramya R. Aroul (Contact Author)

University of Texas at Arlington - Department of Finance and Real Estate ( email )

Box 19449 UTA
Arlington, TX 76019
United States

HOME PAGE: http://omega.uta.edu/~rxa0885/

J. Andrew Hansz

E.V. Williams Center for Real Estate ( email )

Norfolk, VA 23529-0222
United States
7576833505 (Phone)

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