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Neighborhood effects of concentrated mortgage foreclosures

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  • Schuetz, Jenny
  • Been, Vicki
  • Ellen, Ingrid Gould
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    Abstract

    As the national mortgage crisis has worsened, an increasing number of communities are facing declining housing prices and high rates of foreclosure. Central to the call for government intervention in this crisis is the claim that foreclosures not only hurt those who are losing their homes to foreclosure, but also harm neighbors by reducing the value of nearby properties and in turn, reducing local governments' tax bases. The extent to which foreclosures do in fact drive down neighboring property values has become a crucial question for policy-makers. In this paper, we use a unique dataset on property sales and foreclosure filings in New York City from 2000 to 2005 to identify the effects of foreclosure starts on housing prices in the surrounding neighborhood. Regression results suggest that above some threshold, proximity to properties in foreclosure is associated with lower sales prices. The magnitude of the price discount increases with the number of properties in foreclosure, but not in a linear relationship.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Housing Economics.

    Volume (Year): 17 (2008)
    Issue (Month): 4 (December)
    Pages: 306-319

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    Handle: RePEc:eee:jhouse:v:17:y:2008:i:4:p:306-319

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    Web page: http://www.elsevier.com/locate/inca/622881

    Related research

    Keywords: Foreclosures Neighborhoods Property values Spillovers;

    References

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    1. Zhenguo Lin & Eric Rosenblatt & Vincent Yao, 2009. "Spillover Effects of Foreclosures on Neighborhood Property Values," The Journal of Real Estate Finance and Economics, Springer, vol. 38(4), pages 387-407, May.
    2. Dan Immergluck & Geoff Smith, 2005. "The impact of single-family mortgage foreclosures on neighborhood crime," Proceedings 955, Federal Reserve Bank of Chicago.
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    Citations

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    Cited by:
    1. Been, Vicki & Weselcouch, Mary & Voicu, Ioan & Murff, Scott, 2013. "Determinants of the incidence of U.S. Mortgage Loan Modifications," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3951-3973.
    2. Benito Arruñada & Amnon Lehavi, 2010. "Prime property institutions for a subprime era: Toward innovative models of homeownership," Economics Working Papers 1217, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Kashian, Russell & Cebula, Richard & Cramer, Eric, 2014. "Foreclosures in an Exurb: Multiple Empirical Analyses through a Prism," MPRA Paper 55557, University Library of Munich, Germany.
    4. Chan, Sewin & Gedal, Michael & Been, Vicki & Haughwout, Andrew, 2011. "The role of neighborhood characteristics in mortgage default risk: evidence from New York City," MPRA Paper 33941, University Library of Munich, Germany.
    5. Janet Currie & Erdal Tekin, 2011. "Is there a Link Between Foreclosure and Health?," NBER Working Papers 17310, National Bureau of Economic Research, Inc.
    6. Bayram, Armagan & Solak, Senay & Johnson, Michael, 2014. "Stochastic models for strategic resource allocation in nonprofit foreclosed housing acquisitions," European Journal of Operational Research, Elsevier, vol. 233(1), pages 246-262.
    7. Whitaker, Stephan & Fitzpatrick IV, Thomas J., 2013. "Deconstructing distressed-property spillovers: The effects of vacant, tax-delinquent, and foreclosed properties in housing submarkets," Journal of Housing Economics, Elsevier, vol. 22(2), pages 79-91.
    8. Sandra Phillips, 2010. "The Subprime Crisis and African Americans," The Review of Black Political Economy, Springer, vol. 37(3), pages 223-229, September.
    9. Biswas, Arnab, 2012. "Housing submarkets and the impacts of foreclosures on property prices," Journal of Housing Economics, Elsevier, vol. 21(3), pages 235-245.
    10. Johnson, Michael P. & Solak, Senay & Drew, Rachel Bogardus & Keisler, Jeffrey, 2013. "Property value impacts of foreclosed housing acquisitions under uncertainty," Socio-Economic Planning Sciences, Elsevier, vol. 47(4), pages 292-308.
    11. Dorsey, Robert E. & Hu, Haixin & Mayer, Walter J. & Wang, Hui-chen, 2010. "Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle," Journal of Housing Economics, Elsevier, vol. 19(2), pages 75-93, June.
    12. Michael Johnson & David Turcotte & Felicia Sullivan, 2010. "What Foreclosed Homes Should a Municipality Purchase to Stabilize Vulnerable Neighborhoods?," Networks and Spatial Economics, Springer, vol. 10(3), pages 363-388, September.

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