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Researchers Quantify The Foreclosure Effect

With completed foreclosures on the rise, it's generally known that they have a serious impact on the housing market. A new study (PDF) by MIT and Harvard researchers puts an exact number on it: 27 percent.

That's how much less on average a foreclosed home in Massachusetts sold for compared to other homes that were sold involuntarily, due to a death, for example.

The researchers examined close to 2 million home sales in the state between 1987 and 2009.

MIT economist Parag Pathak says they also looked at the impact foreclosures had on the average sale price of nearby homes.

"If you have a foreclosure within a 20th of a mile — that's about 250 feet — and that happens in the previous year, the year before you sell your house, that's going to depress the value of your house by about 1.1 percent," Pathak says.

Taking all the nearby homes together, that equals a loss of  $140,000 in value in 2008.

Pathak says the study underscores that the Bay State is not immune to the foreclosure crisis that has devastated other areas. "One thing people often think is the foreclosure problem is a problem in Nevada or Phoenix, but in urban areas of the state, it's affecting a lot of people," he says.

This program aired on July 25, 2010. The audio for this program is not available.

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