Inter-regional home price dynamics through the foreclosure crisis
AbstractOverall regional conditions such as employment, geography, and amenities, favor the co-movement of housing prices in central cities and their suburbs. Simultaneously, over half a century of sprawl may induce a negative relation between suburban and central city home prices, with central city values falling relative to suburban home values. What happens to the relationship between subhousing markets when cities are shocked by the foreclosure crisis? This paper builds repeat-sales indices to explore home price dynamics before and after the foreclosure crisis in the Cleveland area, a market that in the aggregate had little home price appreciation prior to the crisis, but significant follow-up depreciation. The analysis finds evidence that connectedness, expressed as the relative importance of neighboring housing market conditions in explaining city home prices, increases among submarkets even as they experience varying levels of foreclosure rates, and that foreclosure effects give little sign of receding in the near future. The analysis is relevant to the discussion of economic recovery among city and suburban communities as the nation faces high inventories of soon-to-be foreclosed properties.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 1119.
Date of creation: 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-09 (All new papers)
- NEP-GEO-2011-10-09 (Economic Geography)
- NEP-URE-2011-10-09 (Urban & Real Estate Economics)
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