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Deconstructing distressed-property spillovers: The effects of vacant, tax-delinquent, and foreclosed properties in housing submarkets

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Author Info

  • Whitaker, Stephan
  • Fitzpatrick IV, Thomas J.

Abstract

In this empirical analysis, we estimate the impacts of property-tax delinquency, vacancy, and foreclosures on the value of neighboring homes. We demonstrate that these externalities differ in high- and low-poverty submarkets. Numerous studies have estimated the externality of foreclosures. These papers theorize that the foreclosure impact works partially through creating vacant and neglected homes. To our knowledge, this is only the second attempt to estimate the impact of vacancy itself and the first to use tax-delinquency as a measure of property neglect. We link vacancy observations from Postal Service data with property-tax delinquency and sales data from Cuyahoga County, Ohio. We find that an additional property within 500ft that is vacant or delinquent reduces a home’s selling price by 1 to 2%. In low-poverty submarkets, the negative impact of a home that is both vacant and delinquent is −4.6%. Low-poverty submarkets penalize a sale near a tax-current recent foreclosure by 4 to 8%. In high-poverty submarkets, we observe positive correlations of sale prices with vacant foreclosures. This may reflect lenders selectively foreclosing only on relatively well-maintained properties.

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Bibliographic Info

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

Volume (Year): 22 (2013)
Issue (Month): 2 ()
Pages: 79-91

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Handle: RePEc:eee:jhouse:v:22:y:2013:i:2:p:79-91

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

Related research

Keywords: Vacancy; Property tax delinquency; Foreclosure; Property values; Spatial Hedonic price models; R21; R31;

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References

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  1. Jeremy R. Groves & William H. Rogers, 2011. "Effectiveness of RCA Institutions to Limit Local Externalities: Using Foreclosure Data to Test Covenant Effectiveness," Land Economics, University of Wisconsin Press, vol. 87(4), pages 559-581.
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  3. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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  7. 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.
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  9. Schuetz, Jenny & Been, Vicki & Ellen, Ingrid Gould, 2008. "Neighborhood effects of concentrated mortgage foreclosures," Journal of Housing Economics, Elsevier, vol. 17(4), pages 306-319, December.
  10. Jordan Rappaport, 2003. "U.S. urban decline and growth, 1950 to 2000," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 15-44.
  11. Stephan Whitaker, 2011. "Foreclosure-related vacancy rates," Economic Commentary, Federal Reserve Bank of Cleveland, issue July.
  12. Harding, John P. & Rosenblatt, Eric & Yao, Vincent W., 2009. "The contagion effect of foreclosed properties," Journal of Urban Economics, Elsevier, vol. 66(3), pages 164-178, November.
  13. Downes, Thomas A. & Zabel, Jeffrey E., 2002. "The impact of school characteristics on house prices: Chicago 1987-1991," Journal of Urban Economics, Elsevier, vol. 52(1), pages 1-25, July.
  14. William H. Rogers & William Winter, 2009. "The Impact of Foreclosures on Neighboring Housing Sales," Journal of Real Estate Research, American Real Estate Society, vol. 31(4), pages 455-480.
  15. William H. Rogers, 2010. "Declining foreclosure neighborhood effects over time," Housing Policy Debate, Taylor & Francis Journals, vol. 20(4), pages 687-706, September.
  16. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec..
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