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Deconstructing distressed-property spillovers: The effects of vacant, tax-delinquent, and foreclosed properties in housing submarkets

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  • Whitaker, Stephan
  • Fitzpatrick IV, Thomas J.

Abstract

In this empirical analysis, we estimate the impacts of property-tax delinquency, vacancy, and foreclosures on the value of neighboring homes. We demonstrate that these externalities differ in high- and low-poverty submarkets. Numerous studies have estimated the externality of foreclosures. These papers theorize that the foreclosure impact works partially through creating vacant and neglected homes. To our knowledge, this is only the second attempt to estimate the impact of vacancy itself and the first to use tax-delinquency as a measure of property neglect. We link vacancy observations from Postal Service data with property-tax delinquency and sales data from Cuyahoga County, Ohio. We find that an additional property within 500ft that is vacant or delinquent reduces a home’s selling price by 1 to 2%. In low-poverty submarkets, the negative impact of a home that is both vacant and delinquent is −4.6%. Low-poverty submarkets penalize a sale near a tax-current recent foreclosure by 4 to 8%. In high-poverty submarkets, we observe positive correlations of sale prices with vacant foreclosures. This may reflect lenders selectively foreclosing only on relatively well-maintained properties.

Suggested Citation

  • Whitaker, Stephan & Fitzpatrick IV, Thomas J., 2013. "Deconstructing distressed-property spillovers: The effects of vacant, tax-delinquent, and foreclosed properties in housing submarkets," Journal of Housing Economics, Elsevier, vol. 22(2), pages 79-91.
  • Handle: RePEc:eee:jhouse:v:22:y:2013:i:2:p:79-91
    DOI: 10.1016/j.jhe.2013.04.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fernando Ferreira & Joseph Gyourko, 2015. "A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers from 1997 to 2012," NBER Working Papers 21261, National Bureau of Economic Research, Inc.
    2. Molloy, Raven S., 2014. "Long-Term Vacancy in the United States," Finance and Economics Discussion Series 2014-73, Board of Governors of the Federal Reserve System (U.S.).
    3. David Berger & Nicholas Turner & Eric Zwick, 2016. "Stimulating Housing Markets," NBER Working Papers 22903, National Bureau of Economic Research, Inc.
    4. repec:eee:regeco:v:66:y:2017:i:c:p:16-27 is not listed on IDEAS
    5. Cohen, Jeffrey P. & Coughlin, Cletus C. & Yao, Vincent W., 2016. "Sales of Distressed Residential Property: What Have We Learned from Recent Research?," Review, Federal Reserve Bank of St. Louis, vol. 98(3), pages 159-188.
    6. Schuetz, Jenny & Spader, Jonathan & Cortes, Alvaro, 2016. "Have distressed neighborhoods recovered? Evidence from the neighborhood stabilization program," Journal of Housing Economics, Elsevier, vol. 34(C), pages 30-48.
    7. Anthony Yezer & Yishen Liu, 2017. "Can Differences Deceive? The Case of “Foreclosure Externalities"," Working Papers 2017-29, The George Washington University, Institute for International Economic Policy.
    8. Lerbs, Oliver & Teske, Markus, 2016. "The house price-vacancy curve," ZEW Discussion Papers 16-082, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    9. Spader, Jonathan & Schuetz, Jenny & Cortes, Alvaro, 2016. "Fewer vacants, fewer crimes? Impacts of neighborhood revitalization policies on crime," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 73-84.
    10. Molloy, Raven, 2016. "Long-term vacant housing in the United States," Regional Science and Urban Economics, Elsevier, vol. 59(C), pages 118-129.
    11. Coulton, Claudia J. & Richter, Francisca & Kim, Seok-Joo & Fischer, Robert & Cho, Youngmin, 2016. "Temporal effects of distressed housing on early childhood risk factors and kindergarten readiness," Children and Youth Services Review, Elsevier, vol. 68(C), pages 59-72.
    12. Xu, Yilan, 2014. "Does mortgage deregulation increase foreclosures? Evidence from Cleveland," Regional Science and Urban Economics, Elsevier, vol. 46(C), pages 126-139.
    13. Schuetz, Jenny & Spader, Jonathan & Buell, Jennifer Lewis & Burnett, Kimberly & Buron, Larry & Cortes, Alvaro & DiDomenico, Michael & Jefferson, Anna & Redfearn, Christian & Whitlow, Stephen, 2015. "Which Way to Recovery? Housing Market Outcomes and the Neighborhood Stabilization Program," Finance and Economics Discussion Series 2015-4, Board of Governors of the Federal Reserve System (U.S.).
    14. Younghoon Lee & Sanghyo Lee & Jaejun Kim, 2017. "Analysis of the Dynamic Relationship between Fluctuations in the Korean Housing Market and the Occurrence of Unsold New Housing Stocks," Sustainability, MDPI, Open Access Journal, vol. 9(1), pages 1-23, January.

    More about this item

    Keywords

    Vacancy; Property tax delinquency; Foreclosure; Property values; Spatial Hedonic price models; R21; R31;

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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