Foreclose, Default, Repeat

Home prices continue to fall, dropping another 18.7 percent in March. The price plunge is being blamed in part on the glut of cheap, foreclosed homes on the market. How cheap are these homes? They’re selling for as much as 31 percent below market value. Of course, deteriorating home prices are a leading driver of mortgage defaults, so more foreclosed homes lead to lower home prices, which lead to more foreclosures. [%comments]

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  1. mbp says:

    “Discount” is not well defined in this case. It often means difference between current price and the price on some previous date, or the current balance of the mortgage, or some such. (In this case the underlying article says “nominal market value”, which does not add anything to my understanding).

    Almost by definition, the price at which something sells is the market price for that particular thing at that particular time.

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  2. Traciatim says:

    “They’re selling for as much as 31 percent below market value.”

    Which is probably close to their true value.

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  3. L says:

    Oye… if the house can only sell at 31% of market value… that means the market value is 31% lower than you think it should be. It IS the market value. The market has dropped.

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  4. Clay says:

    I’m not an economist or anything, but isn’t whatever price they are selling for “market value” by definition?

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  5. Craig says:

    Housing prices didn’t fall 18.7% in March, they fell at an annual rate of 18.7%.

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  6. Ian McKay says:

    Perhaps it is a bit too easy to default on a mortgage. There should be more significant penalties. This whole may have been prevented if there were in the first place.

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  7. RZ says:

    None of these homes selling for 31% below market value appear to be in Los Angeles.

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  8. MikeM says:

    Let them fall! I’m saving up a down payment on my first home. I’ve payed way more than I otherwise would have in rent over the years during this housing bubble. Who’s looking out for the people who DIDN’T overextend themselves?

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