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The Impact of Default and Foreclosure on Housing Values: Rings Vs. Neighborhoods Approach

Author

Listed:
  • Ying Huang

    (University of South Alabama)

  • Ronald W. Spahr

    (The University of Memphis)

  • Mark A. Sunderman

    (The University of Memphis)

Abstract

We use neighborhood boundaries, in addition to a concentric rings approach, to examine single family foreclosure spillover effects on residential sales in Shelby County, TN for 2001–16. We find that using more homogeneous neighborhoods provides better and more consistent results as compared to results of using conventional concentric rings boundaries. Applying hedonic modeling, 2SLS, two-way clustered residual models to account for spatial, temporal and locational effects, we control for market cycles, property characteristics and fixed effects including date of sale. We find significant negative non-linear convex foreclosure rate impacts on sales prices given different locational, shape and demographic neighborhoods. Neighborhoods with high chronic foreclosure rates sustain substantially higher negative price impacts, while those with both lower acute or chronic foreclosure rates show lower price impacts.

Suggested Citation

  • Ying Huang & Ronald W. Spahr & Mark A. Sunderman, 2020. "The Impact of Default and Foreclosure on Housing Values: Rings Vs. Neighborhoods Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 60(3), pages 338-374, April.
    • Handle: RePEc:kap:jrefec:v:60:y:2020:i:3:d:10.1007_s11146-018-9691-y
    DOI: 10.1007/s11146-018-9691-y
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    More about this item

    Keywords

    Housing values; Mortgage default; Foreclosure;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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