Past Foreclosures Linked to Faster Appreciation

If you live in a home that went through a foreclosure during the housing crisis, you are likely enjoying what some analysts are describing as “breakneck” appreciation today. According to Zillow Research, the median value of a “crisis-era foreclosed home” rose 10.3 percent over the past 12 months. Median home prices overall rose 6.5 percent over the same time period. In fact, Zillow analysts noted, homes that went through foreclosures are actually appreciating at faster rates now than they were when overall home appreciation was higher.

Since the recession, homes that went through a foreclosure have increased 74.5 percent in overall value. Non-foreclosure homes increased “only” 46 percent over that same time period. Of course, foreclosed homes very well may have been affected by other factors, such as abandonment, neglect, and deferred maintenance leading up to and during the foreclosure process. Also, the analysts noted, median home values among foreclosed homes is are still nearly $10,000 below the overall home value nationwide.

“The data show just how deep the scars of the recession really run, especially for the nation’s least wealthy,” wrote Zillow analyst Sarah Mikhitarian. One of the reasons foreclosed homes may have lower values overall is entry-level homes were far more likely to experience foreclosure during the housing crash. She noted in particular that during the housing recovery, the homes that went through foreclosure appreciated in value at about 1.6 times the rate of the median U.S. home, but still only surpassed pre-recession peak values on a national scale this past August.

Mikhitarian added, “For more-affluent Americans (those in the top 20th percentile of total wealth), their home has and continues to account for a much smaller share of their net worth [than middle- and low-income Americans].” She explained that this relatively lower share of net worth insulated higher-value homes from foreclosure because the owners were more likely to avoid foreclosure even if their homes were underwater for a time. “Of all the homes foreclosed on nationwide between January 2007 and December 2015, 45.4 percent were in the bottom third of all homes in terms of value,” she said.

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