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Determinants of a Foreclosure Discount
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

Using a dataset with individual appraisals of foreclosed apartments sold through auction in Stockholm, Sweden, the issue of selection bias and a potential overestimation of a foreclosure related discount on price is addressed. A mean discount of 7.9% with a corresponding median value of 9.5% is shown. A hedonic model is also applied. It is found that about half of the impact on price caused by a forced sale is attributable to the search process on the real estate market. These results contrasts from earlier research having explained a negative impact on price to seller motivational factors. These results provide insight towards the dynamics of a negative impact on price caused by a forced sale, and has the potential to allow stakeholders to model a potential discount in greater detail for individual foreclosed properties, and contribute to management of credit risk. 

National Category
Economics
Identifiers
URN: urn:nbn:se:kth:diva-215687OAI: oai:DiVA.org:kth-215687DiVA, id: diva2:1148926
Note

QC 20171017

Available from: 2017-10-12 Created: 2017-10-12 Last updated: 2018-04-03Bibliographically approved
In thesis
1. Essays on Foreclosures and Housing Debt
Open this publication in new window or tab >>Essays on Foreclosures and Housing Debt
2018 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of four self-contained essays in the field of real estate economics, and specifically, the market for single-family homes. The first three essays examine sales of foreclosed properties, while essay four is on the conversion process of rental apartments to owner-occupied units in the co-operative form. These topics have a common denominator in the analysis of real estate markets and a link to debt financing. The effect of a foreclosure on price is examined through several methods. In the first essay, a spatial hedonic model is applied on transaction data. In the second essay, the impact on holding-period returns and the rate-of-turnover is estimated through propensity-score matching. Hedonic regressions and appraisal data is used in the third essay, which analyzes the determinants of the price impact caused by a forced sale. The impact of local market conditions is tested and a discount on price is related to the search process among market participants.

The second topic of conversions is addressed in essay four, which focuses on an informational asymmetry between tenants involved in the conversion process and other market participants. An incentive to mismanage housing co-operatives financially is examined through hedonic models applied to apartment transaction data. 

Abstract [sv]

Denna avhandling består av fyra självständiga uppsatser inom området fastighetsekonomi, och mer specifikt marknaden för ägda bostäder. De tre första uppsatserna undersöker exekutiva försäljningar av bostäder medan uppsats fyra undersöker processen att ombilda hyresrätter till bostadsrätter. Dessa två teman har gemensamt att fastighetsmarknaden och relationen mellan fastigheter och skuldfinansiering analyseras. Effekten på pris som orsakas av en exekutiv försäljning undersöks med flera metoder. I uppsats ett tillämpas en spatial hedonisk modell på transaktionsdata. I den andra uppsatsen undersöks den påverkan som en exekutiv försäljning har på omsättningshastighet och avkastning genom propensity-score matchning. Hedoniska modeller och data med uppskattade värden används i uppsats tre, som undersöker faktorer som påverkar den priseffekt som orsakas av en exekutiv försäljning. Påverkan av lokala marknadsförhållanden testas, och en rabatt relateras till sökprocessen hos köpare och säljare.

Det andra temat i denna avhandling behandlas i uppsats fyra som har fokus på en informationsasymmetri mellan de hyresgäster som är inblandade i ombildningsprocessen från hyreslägenheter till bostadsrätter, och andra marknadsaktörer. Ett incitament för att missköta bostadsrättsföreningens ekonomi undersöks genom hedoniska modeller som tillämpas på transaktionsdata. 

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2018. p. 39
Series
TRITA-ABE-DLT ; 187
Keyword
Real Estate Economics, Housing, Foreclosure, Mortgage, Hedonic Modeling, Propensity-Score Matching, Informational Asymmetries, Matching Theory
National Category
Economics and Business
Research subject
Real Estate and Construction Management; Economics; Business Studies
Identifiers
urn:nbn:se:kth:diva-225158 (URN)978-91-7729-735-2 (ISBN)
Public defence
2018-05-04, L1, Drottning Kristinas väg 30, Stockholm, 13:00 (English)
Opponent
Supervisors
Funder
VINNOVA
Note

QC 20180403

Available from: 2018-04-03 Created: 2018-04-02 Last updated: 2018-05-15Bibliographically approved

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