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Foreclosures increase, but don’t overwhelm market

Study: Discounts deeper in markets where foreclosures exceed 8% of sales

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A new study reveals that markets in which property foreclosures exceed 8 percent of sales require deeper price discounts to move inventory.  The study, by First American Real Estate Solutions researcher Christopher Cagan, verified two widely held beliefs: that properties at the lower end of the price range for their markets have higher foreclosure rates and require deeper price discounts to sell, and that the amount of the discounts is tied to foreclosures as a percentage of total sales in a given market. "Discounts tend to be deeper in markets where foreclosures comprise 8 percent or more of all sales, regardless of geographic location or market type," Cagan said. The study found, for example, that the median discount for foreclosed properties was 20 percent in Baltimore, Md., where foreclosures made up 8.9 percent of sales during the first half of 2006. In Orange County, Calif., the median discount was a more modest 3.8 percent during the same period. But foreclosure sales a...