Community Development Innovation Review

April 2009

The Accumulation of Foreclosed Properties: Trajectories of Metropolitan REO Inventories During the 2007–2008 Mortgage Crisis


In addition to causing financial and social hardship to families and individuals, high foreclosure rates can have negative effects on neighborhoods, cities, and metropolitan regions. One key concern among policymakers and community developers is the extent to which lender-owned homes, often called real estate owned or REO properties, accumulate in different local housing markets. The neighborhood and community impacts of foreclosure are expected to be worse if foreclosed properties sit vacant for significant periods of time and are not absorbed back into the market in some productive way. The inventory of REO properties in a local housing market or submarket may become not just a symptom of housing market decline but an impediment to recovery. An increasing amount of REO inventory in a local or regional housing market may discourage price stabilization and the return of even moderate levels of home purchase activity and financing.