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Why Foreclosure Rates in African American Neighborhoods are so High: Looking at the Real Reaonss

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  • John Gilderbloom

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  • Katrina Anaker
  • Gregory Squires
  • Matt Hanka
  • Joshua Ambrosius
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    Abstract

    Foreclosures have become one of the most important urban problems faced by contemporary cities. Our goal is to better understand factors that affect foreclosure rates in a typical, mid-sized U.S. city. While previous research has found that a key explanatory variable positively affecting foreclosures is the percentage of minorities in a neighborhood, our model finds that the effect of percent non-white is impacted by several key intervening variables, such as the presence and proximity of EPA listed Super-Fund Sites along with walkability, in these majority black neighborhoods. In the past, these factors have been ignored by social scientists because they are difficult to measure. Firstly, we look at how speculators in majority black neighborhoods account for a significant share of foreclosures in these neighborhoods. Secondly, we examine the effect of EPA-listed Superfund Sites and find that in this instance almost all are located either near or within many of these majority black neighborhoods and finally we look at walkability and its effect on foreclosures. We find that these three variables help explain the causes of greater foreclosures occurring in majority black neighborhoods. These three key variables add to previous explanations of high foreclosures resulting from unfavorable loan terms offered in black neighborhoods.

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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa11/ersa11acfinal01597.pdf
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    Bibliographic Info

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p1597.

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    Date of creation: Sep 2011
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    Handle: RePEc:wiw:wiwrsa:ersa11p1597

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    1. Richard Anderson & James VanderHoff, 1999. "Mortgage Default Rates and Borrower Race," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 18(2), pages 279-290.
    2. Tatom, John, 2007. "Why is the foreclosure rate so high in Indiana?," MPRA Paper 4674, University Library of Munich, Germany.
    3. Grover, Michael & Smith, Laura & Todd, Richard M., 2008. "Targeting foreclosure interventions: An analysis of neighborhood characteristics associated with high foreclosure rates in two Minnesota counties," Journal of Economics and Business, Elsevier, Elsevier, vol. 60(1-2), pages 91-109.
    4. William C. Apgar & Mark Duda, 2003. "The twenty-fifth anniversary of the Community Reinvestment Act: past accomplishments and future regulatory challenges," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Jun, pages 169-191.
    5. Robert Order & Peter Zorn, 2000. "Income, Location and Default: Some Implications for Community Lending," Real Estate Economics, American Real Estate and Urban Economics Association, American Real Estate and Urban Economics Association, vol. 28(3), pages 385-404.
    6. Brent W. Ambrose & Charles A. Capone, 1998. "Modeling the Conditional Probability of Foreclosure in the Context of Single-Family Mortgage Default Resolutions," Real Estate Economics, American Real Estate and Urban Economics Association, American Real Estate and Urban Economics Association, vol. 26(3), pages 391-429.
    7. Tatom, John, 2008. "The U.S. foreclosure crisis: a two-pronged assault on the U.S. economy," MPRA Paper 9787, University Library of Munich, Germany.
    8. Anselin, Luc & Bera, Anil K. & Florax, Raymond & Yoon, Mann J., 1996. "Simple diagnostic tests for spatial dependence," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 26(1), pages 77-104, February.
    9. Foote, Christopher L. & Gerardi, Kristopher & Goette, Lorenz & Willen, Paul S., 2008. "Just the facts: An initial analysis of subprime's role in the housing crisis," Journal of Housing Economics, Elsevier, Elsevier, vol. 17(4), pages 291-305, December.
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