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A profile of the mortgage crisis in a low-and-moderate-income community

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Author Info

  • Lynn Fisher
  • Lauren Lambie-Hanson
  • Paul S. Willen
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    Abstract

    This paper assesses the impact of the mortgage crisis on Chelsea, Massachusetts, a low-and-moderate-income community of 35,000 adjacent to Boston. After years of rapid growth, house prices started falling in 2005. According to our repeat-sales indices, by the end of 2009 prices had fallen by as much as 50 percent from their peak. Foreclosures have soared and lenders have repossessed or allowed short sales on more than 330 homes, resulting in a forced exit of at least one in 30 of the town's households. A large fraction of the foreclosed properties were two- or three-family homes, so the number of households affected by the crisis undoubtedly extends beyond the number of foreclosures. But there is some positive news. After a slow start, servicers appear to have become far more efficient at selling foreclosed properties, so the stock of real estate owned properties has been falling since 2008. For the most part, homeowners who bought prior to the peak of the boom have so far avoided selling in the moribund market and thus are poised to gain if and when the market recovers. In addition, the crisis has not prevented homeowners from maintaining and improving their properties: both the number and the dollar value of building permits have held up well even for those homeowners who have bought recently and likely have negative equity in their homes.

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    File URL: http://www.bostonfed.org/economic/ppdp/2010/ppdp1006.htm
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Boston in its series Public Policy Discussion Paper with number 10-6.

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    Date of creation: 2010
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    Handle: RePEc:fip:fedbpp:10-6

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    Keywords: Housing - Prices - Massachusetts ; Foreclosure - Massachusetts;

    This paper has been announced in the following NEP Reports:

    References

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    1. John Y. Campbell & Stefano Giglio & Parag Pathak, 2011. "Forced Sales and House Prices," American Economic Review, American Economic Association, vol. 101(5), pages 2108-31, August.
    2. Christopher Foote & Kristopher Gerardi & Lorenz Goette & Paul Willen, 2009. "Reducing Foreclosures: No Easy Answers," NBER Working Papers 15063, National Bureau of Economic Research, Inc.
    3. David Genesove & Christopher Mayer, 2001. "Loss Aversion And Seller Behavior: Evidence From The Housing Market," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1233-1260, November.
    4. Andrew Haughwout & Richard Peach & Joseph Tracy, 2009. "The homeownership gap," Staff Reports 418, Federal Reserve Bank of New York.
    5. Paul S. Calem & Kevin Gillen & Susan Wachter, 2004. "The Neighborhood Distribution of Subprime Mortgage Lending," The Journal of Real Estate Finance and Economics, Springer, vol. 29(4), pages 393-410, December.
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    Cited by:
    1. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2013. "The Vulnerability of Minority Homeowners in the Housing Boom and Bust," NBER Working Papers 19020, National Bureau of Economic Research, Inc.

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