Research Publication

Foreclosure Timelines and House Prices

July 31, 2017

 

A new Fannie Mae Housing Working Paper studies the effect of lengthening foreclosure timelines on local market home prices. Using a unique data set of Fannie Mae distressed properties, the authors find that longer foreclosure timelines dampen price volatility with no meaningful impact on borrower mortgage performance. During the period of declining house prices from 2007 to 2011, extending the average foreclosure timeline by one month was associated with a reduction in cumulative house price decline from county peak to trough by 1.0% and shortening of the time to reach the trough in prices by half a month. During the subsequent home price recovery, extending the average foreclosure timeline by one month was associated with a reduction in the cumulative home price increase from county trough by 0.3% with no significant effect on the timing of recovery. Using a well-established method that matches pairs of counties in MSAs that straddle judicial and statutory legal jurisdictions, the authors further confirm the price volatility dampening effect of longer timelines.

To learn more, read our latest Fannie Mae Working Paper: Foreclosure Timelines and House Prices.