Nobody’s home
Foreclosed homes dot the American landscape — they make up about one in 12 houses with under $1 million left on the mortgage. These foreclosures drive down home prices, both because they add to the housing supply and because the financial firms that acquire the houses want to unload them promptly. However, since foreclosures often occur in economically struggling areas, it is hard to determine how much of the drop in a home’s value is due to its foreclosure, and how much can be blamed on the economy in general.Now, in a recent working paper, MIT economist Parag Pathak and two Harvard researchers, John Y. Campbell and Stefano Giglio, have put a price tag on foreclosures. Specifically, they’ve determined how much a foreclosure dents a home’s value, as opposed to a home going on the market because the owner has died or declared bankruptcy. Moreover, they’ve demonstrated how much foreclosures...