What impact do high foreclosure rates generally have on local real estate markets?

High foreclosure rates typically lead to a surplus of properties on the market, which results in increased competition among sellers. This oversupply can put downward pressure on property values, as potential buyers may have more choices and leverage to negotiate lower prices. Additionally, the prevalence of foreclosures can create a negative perception of the local real estate market, leading to decreased buyer interest and further diminishing property values.

In contrast, the other options do not accurately reflect the reality of how foreclosure rates affect the market. While some might assume that high foreclosure rates would attract investors looking for bargains, this does not generally lead to an overall increase in property values. Instead, it often causes concern among existing homeowners and can deter new buyers, further contributing to the decline in property values.