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The effect of foreclosures on nearby housing prices: supply or disamenity?

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  • Daniel Hartley

Abstract

A number of studies have measured the negative price effects of foreclosed residential properties on nearby property sales. However, only one study beside this one addresses the mechanism responsible for these effects. I measure separate effects for different types of foreclosed properties and use the estimates to decompose he effects of foreclosures on nearby home prices into two components. One component is due to the additional available housing supply and the other is due to a disamenity stemming from deferred maintenance or vacancy. I estimate that each extra unit of supply decreases prices within 0.05 miles by about 1.2% while the disamenity stemming from a foreclosed property is near zero.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 1011.

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Date of creation: 2011
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Handle: RePEc:fip:fedcwp:1011

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Keywords: Foreclosure ; Housing - Prices;

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References

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  1. Christopher L. Foote & Kristopher Gerardi & Paul S. Willen, 2008. "Negative equity and foreclosure: theory and evidence," Public Policy Discussion Paper, Federal Reserve Bank of Boston 08-3, Federal Reserve Bank of Boston.
  2. Leigh Linden & Jonah E. Rockoff, 2008. "Estimates of the Impact of Crime Risk on Property Values from Megan's Laws," American Economic Review, American Economic Association, American Economic Association, vol. 98(3), pages 1103-27, June.
  3. Zhenguo Lin & Eric Rosenblatt & Vincent Yao, 2009. "Spillover Effects of Foreclosures on Neighborhood Property Values," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 38(4), pages 387-407, May.
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Cited by:
  1. Kristopher Gerardi & Eric Rosenblatt & Paul S. Willen & Vincent W. Yao, 2012. "Foreclosure externalities: Some new evidence," Working Paper, Federal Reserve Bank of Atlanta 2012-11, Federal Reserve Bank of Atlanta.
  2. Stephan Whitaker & Thomas J. Fitzpatrick IV, 2012. "Land Bank 2.0: an empirical evaluation," Working Paper 1230, Federal Reserve Bank of Cleveland.
  3. Stephan Whitaker & Thomas J. Fitzpatrick IV, 2012. "The impact of vacant, tax-delinquent, and foreclosed property on sales prices of neighboring homes," Working Paper 1123, Federal Reserve Bank of Cleveland.
  4. Lynn M. Fisher & Lauren Lambie-Hanson & Paul S. Willen, 2013. "The role of proximity in foreclosure externalities: evidence from condominiums," Public Policy Discussion Paper, Federal Reserve Bank of Boston 13-2, Federal Reserve Bank of Boston.
  5. Chan, Sewin & Gedal, Michael & Been, Vicki & Haughwout, Andrew, 2011. "The role of neighborhood characteristics in mortgage default risk: evidence from New York City," MPRA Paper 33941, University Library of Munich, Germany.
  6. Stephan Whitaker, 2011. "Foreclosure-related vacancy rates," Economic Commentary, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue July.
  7. Cohen, Jeffrey P. & Coughlin, Cletus C. & Lopez, David A., 2012. "The boom and bust of U.S. housing prices from various geographic perspectives," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Sep, pages 341-368.
  8. Elliot Anenberg & Edward Kung, 2012. "Estimates of the size and source of price declines due to nearby foreclosures: evidence from San Francisco," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2012-84, Board of Governors of the Federal Reserve System (U.S.).
  9. Atif Mian & Amir Sufi & Francesco Trebbi, 2011. "Foreclosures, House Prices, and the Real Economy," NBER Working Papers 16685, National Bureau of Economic Research, Inc.
  10. repec:reg:wpaper:641 is not listed on IDEAS
  11. Francisca G-C Richter & Youngme Seo, 2011. "Inter-regional home price dynamics through the foreclosure crisis," Working Paper 1119, Federal Reserve Bank of Cleveland.
  12. Lynn M. Fisher & Lauren Lambie-Hanson & Paul S. Willen, 2014. "The Role of Proximity in Foreclosure Externalities: Evidence from Condominiums," NBER Working Papers 20080, National Bureau of Economic Research, Inc.

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