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Forced sales and their impact on real estate prices

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  • Donner, Herman
  • Song, Han-Suck
  • Wilhelmsson, Mats

Abstract

Based on data of sold apartments and single-family houses in Stockholm, Sweden, during the period of 2006 through 2013, we find that forced sales of apartments and single-family houses cause a substantial price discount. The results of a hedonic spatial Durbin model show a negative impact on transaction price of 20.1% for foreclosed apartments and 24.6% for foreclosed single-family houses. Furthermore, the price discount increases when the number of attempted auctions is limited, which is the case for forced apartment sales owing to a lost membership in a housing association (forfeited). In those cases, the discount is as high as 29.1%.

Suggested Citation

  • Donner, Herman & Song, Han-Suck & Wilhelmsson, Mats, 2016. "Forced sales and their impact on real estate prices," Journal of Housing Economics, Elsevier, vol. 34(C), pages 60-68.
    • Handle: RePEc:eee:jhouse:v:34:y:2016:i:c:p:60-68
    DOI: 10.1016/j.jhe.2016.08.002
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    References listed on IDEAS

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    1. Renigier-Biłozor, Małgorzata & Walacik, Marek & Źróbek, Sabina & d’Amato, Maurizio, 2018. "Forced sale discount on property market – How to assess it?," Land Use Policy, Elsevier, vol. 78(C), pages 104-115.
    2. Markus Hertrich, 2019. "A Novel Housing Price Misalignment Indicator for Germany," German Economic Review, Verein für Socialpolitik, vol. 20(4), pages 759-794, November.
    3. Mats Wilhelmsson & Jianyu Zhao, 2018. "Risk Assessment of Housing Market Segments: The Lender’s Perspective," JRFM, MDPI, vol. 11(4), pages 1-22, October.
    4. Mocking, Remco & Overvest, Bastiaan, 2017. "Direct and spillover effects of forced sales on house prices: Evidence from the Netherlands," Journal of Housing Economics, Elsevier, vol. 38(C), pages 50-61.
    5. M. Lundholm, 2021. "Compensation and Socio-Economic Status of Borrowers in Foreclosure: Evidence from Swedish Micro-data," Journal of Consumer Policy, Springer, vol. 44(1), pages 95-116, March.
    6. Shi, Song & Zhang, Hong & Zhang, Jun, 2022. "The impact of a home purchase restrictions (HPR) policy on the distressed property market in Beijing," Journal of Housing Economics, Elsevier, vol. 58(PB).
    7. Amoruso Paola & Mariani Massimo & d’Amato Maurizio & Didonato Raffaele, 2020. "Italian Auction Market: Features of Discounted Forced Sale Price," Real Estate Management and Valuation, Sciendo, vol. 28(3), pages 12-23, September.
    8. Donner, Herman, 2017. "Determinants of a Foreclosure Discount," Working Paper Series 17/2, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    9. Conklin, James N. & Edward Coulson, N. & Diop, Moussa & Mota, Nuno, 2023. "An Alternative Approach to Estimating Foreclosure and Short Sale Discounts," Journal of Urban Economics, Elsevier, vol. 134(C).

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    More about this item

    Keywords

    Foreclosure; Mortgage; Housing; Spatial Durbin model;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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