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Short-Term Own-Price and Spillover Effects of Distressed Residential Properties: The Case of a Housing Crash

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Author Info

  • Nasser Daneshvary

    ()
    (University of Nevada Las Vegas)

  • Terrence M. Clauretie

    ()
    (University of Nevada Las Vegas)

  • Ahmad Kader

    ()
    (University of Nevada Las Vegas)

Abstract

Most previous empirical studies of price spillover effects of foreclosure on no-default transactions are based on data from a stable housing-market period. In this paper, we use 2008 transactions from a housing market with a relatively large number of REO/foreclosures. Our overall results indicate that: (1) REO and in the process of foreclosure have the same spillover effects, but short sales do not produce a spillover effect; (2) models that control for the overall market trend produce smaller spillover effects; (3) the marginal effect of an REO is 1%; (4) the cumulative effects of multiple distressed neighbors can be as severe as 8%; and (5) excluding transactions of homes that were sold under distress from the sample increases the estimated marginal spillover effect to about 2% and the cumulative effects to about 21%.

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Bibliographic Info

Article provided by American Real Estate Society in its journal journal of Real Estate Research.

Volume (Year): 33 (2011)
Issue (Month): 2 ()
Pages: 179-208

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Handle: RePEc:jre:issued:v:33:n:2:2011:p:179-208

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