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Contagion in Housing Markets

In: The Subprime Crisis Lessons for Business Students

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  • Jaime Luque

    (1University of Wisconsin-Madison, USA)

Abstract

Foreclosed homes that create a negative externality on surrounding house prices can attribute this fall in value to the impact foreclosed homes have on the comparable valuation approach. If homes in the neighborhood are foreclosed and subsequently sell for prices well below their original value, this brings down the price of all similar homes in the area. This, however, is not the only factor that causes a fall in home values. Externalities such as the appearance of a neighborhood with empty foreclosed homes, or the diminished social value of a city also induce a decrease in home prices. Understanding how these externalities function can help us gain insight into how we can internalize these externalities and reduce the negative spillover effects they project into communities…

Suggested Citation

  • Jaime Luque, 2017. "Contagion in Housing Markets," World Scientific Book Chapters, in: The Subprime Crisis Lessons for Business Students, chapter 12, pages 99-106, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813200043_0012
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    More about this item

    Keywords

    Subprime Crisis; Great Recession; 2009 Recession; Mortgage; Financial Market; Preventing Recession; 2009 Crisis; Interest Rates;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G1 - Financial Economics - - General Financial Markets

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