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The role of proximity in foreclosure externalities: evidence from condominiums

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

    We explore several different explanations of the effect of foreclosures on neighboring properties using a dataset of transactions in Boston, for which we have rich data on the size and location of condominium associations. There is compelling evidence against a supply effect—nearby condo foreclosures in different associations, and even those within the same association but at different physical addresses, have little impact on condo sale prices. However, condos transact at average discounts of 2.4 percent when a foreclosure shares the same physical address. We view the results as indicating that investment externalities drive foreclosures’ impacts on neighboring house prices.

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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Boston in its series Public Policy Discussion Paper with number 13-2.

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    Date of creation: 2013
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    Handle: RePEc:fip:fedbpp:13-2

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    Related research

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

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    1. Daniel Hartley, 2011. "The effect of foreclosures on nearby housing prices: supply or disamenity?," Working Paper 1011, Federal Reserve Bank of Cleveland.
    2. 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.
    3. Genesove, D. & Mayer, C.J., 1994. "Equity and Time to Sale in the Real Estate Market," Working papers 94-02, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Christopher L. Foote & Kristopher Gerardi & Paul S. Willen, 2008. "Negative equity and foreclosure: theory and evidence," Public Policy Discussion Paper 08-3, Federal Reserve Bank of Boston.
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