IDEAS home Printed from https://ideas.repec.org/a/spr/anresc/v62y2019i3d10.1007_s00168-019-00903-4.html
   My bibliography  Save this article

The heterogeneous spatial impact of foreclosures on nearby property values

Author

Listed:
  • Xian F. Bak

    (Freddie Mac)

  • Geoffrey J. D. Hewings

    (University of Illinois)

Abstract

Foreclosures have negative impacts not just on homeowners, but also on neighboring properties. Due to the heterogeneous characteristics of the housing market, different neighborhoods can be impacted differently by foreclosures. This study focuses on the varying impacts of foreclosures on nearby property values across space. These results can provide insightful directions for decision makers to identify places in greatest need. A semi-parametric approach is applied to allow estimates varying over space. In Chicago, property values most impacted by foreclosures are in the south where the vacancy rate and crime occurrences are high and incomes are low. The spatial variation in impacts is wider for homes priced at the 10th quantile than at the 90th quantile. Moreover, the impacts are generally larger for home prices at the 10th quantile than at the 90th quantile, but the differences are not uniform across space.

Suggested Citation

  • Xian F. Bak & Geoffrey J. D. Hewings, 2019. "The heterogeneous spatial impact of foreclosures on nearby property values," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(3), pages 439-466, June.
    • Handle: RePEc:spr:anresc:v:62:y:2019:i:3:d:10.1007_s00168-019-00903-4
    DOI: 10.1007/s00168-019-00903-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00168-019-00903-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00168-019-00903-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. McMillen, Daniel, 2015. "Conditionally parametric quantile regression for spatial data: An analysis of land values in early nineteenth century Chicago," Regional Science and Urban Economics, Elsevier, vol. 55(C), pages 28-38.
    2. Bak, Xian F. & Hewings, Geoffrey J.D., 2017. "Measuring foreclosure impact mitigation: Evidence from the Neighborhood Stabilization Program in Chicago," Regional Science and Urban Economics, Elsevier, vol. 63(C), pages 38-56.
    3. Elliot Anenberg & Edward Kung, 2014. "Estimates of the Size and Source of Price Declines Due to Nearby Foreclosures," American Economic Review, American Economic Association, vol. 104(8), pages 2527-2551, August.
    4. Ellen, Ingrid Gould & Lacoe, Johanna & Sharygin, Claudia Ayanna, 2013. "Do foreclosures cause crime?," Journal of Urban Economics, Elsevier, vol. 74(C), pages 59-70.
    5. N. Edward Coulson & Jeffrey E. Zabel, 2013. "What Can We Learn from Hedonic Models When Housing Markets Are Dominated by Foreclosures?," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 261-279, June.
    6. Coro Chasco & Julie Le Gallo, 2015. "Heterogeneity in Perceptions of Noise and Air Pollution: A Spatial Quantile Approach on the City of Madrid," Spatial Economic Analysis, Taylor & Francis Journals, vol. 10(3), pages 317-343, September.
    7. Gerardi, Kristopher & Rosenblatt, Eric & Willen, Paul S. & Yao, Vincent, 2015. "Foreclosure externalities: New evidence," Journal of Urban Economics, Elsevier, vol. 87(C), pages 42-56.
    8. Daniel McMillen & Maria Edisa Soppelsa, 2015. "A Conditionally Parametric Probit Model Of Microdata Land Use In Chicago," Journal of Regional Science, Wiley Blackwell, vol. 55(3), pages 391-415, June.
    9. William H. Rogers & William Winter, 2009. "The Impact of Foreclosures on Neighboring Housing Sales," Journal of Real Estate Research, American Real Estate Society, vol. 31(4), pages 455-480.
    10. Dan-Lin Yu, 2006. "Spatially varying development mechanisms in the Greater Beijing Area: a geographically weighted regression investigation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 40(1), pages 173-190, March.
    11. 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.
    12. John Y. Campbell & Stefano Giglio & Parag Pathak, 2011. "Forced Sales and House Prices," American Economic Review, American Economic Association, vol. 101(5), pages 2108-2131, August.
    13. Kelejian, Harry H & Prucha, Ingmar R, 1998. "A Generalized Spatial Two-Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 99-121, July.
    14. Zhang, Lei & Leonard, Tammy, 2014. "Neighborhood impact of foreclosure: A quantile regression approach," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 133-143.
    15. Zhenguo Lin & Eric Rosenblatt & Vincent Yao, 2009. "Spillover Effects of Foreclosures on Neighborhood Property Values," The Journal of Real Estate Finance and Economics, Springer, vol. 38(4), pages 387-407, May.
    16. Walls, Margaret & Gerarden, Todd & Palmer, Karen & Bak, Xian Fang, 2017. "Is energy efficiency capitalized into home prices? Evidence from three U.S. cities," Journal of Environmental Economics and Management, Elsevier, vol. 82(C), pages 104-124.
    17. Hartley, Daniel, 2014. "The effect of foreclosures on nearby housing prices: Supply or dis-amenity?," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 108-117.
    18. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    19. W. Scott Frame, 2010. "Estimating the effect of mortgage foreclosures on nearby property values: a critical review of the literature," Economic Review, Federal Reserve Bank of Atlanta, vol. 95(3).
    20. Dan Immergluck & Geoff Smith, 2006. "The external costs of foreclosure: The impact of single‐family mortgage foreclosures on property values," Housing Policy Debate, Taylor & Francis Journals, vol. 17(1), pages 57-79.
    21. Schuetz, Jenny & Been, Vicki & Ellen, Ingrid Gould, 2008. "Neighborhood effects of concentrated mortgage foreclosures," Journal of Housing Economics, Elsevier, vol. 17(4), pages 306-319, December.
    22. Kuminoff, Nicolai V. & Parmeter, Christopher F. & Pope, Jaren C., 2010. "Which hedonic models can we trust to recover the marginal willingness to pay for environmental amenities?," Journal of Environmental Economics and Management, Elsevier, vol. 60(3), pages 145-160, November.
    23. Harding, John P. & Rosenblatt, Eric & Yao, Vincent W., 2012. "The foreclosure discount: Myth or reality?," Journal of Urban Economics, Elsevier, vol. 71(2), pages 204-218.
    24. Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
    25. A. Fotheringham & Ricardo Crespo & Jing Yao, 2015. "Exploring, modelling and predicting spatiotemporal variations in house prices," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 417-436, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jeffrey P. Cohen & Cletus C. Coughlin & Vincent W. Yao, 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.
    2. Suzuki, Masatomo & Hino, Kimihiro & Muto, Sachio, 2022. "Negative externalities of long-term vacant homes: Evidence from Japan," Journal of Housing Economics, Elsevier, vol. 57(C).
    3. Biswas, Arnab & Cunningham, Chris & Gerardi, Kristopher & Sexton, Daniel, 2021. "Foreclosure externalities and Vacant Property Registration Ordinances," Journal of Urban Economics, Elsevier, vol. 123(C).
    4. John P. Harding & Jing Li & Stuart S. Rosenthal & Xirui Zhang, 2022. "Forced moves and home maintenance: The amplifying effects of mortgage payment burden on underwater homeowners," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 498-533, June.
    5. Lambie-Hanson, Lauren, 2015. "When does delinquency result in neglect? Mortgage distress and property maintenance," Journal of Urban Economics, Elsevier, vol. 90(C), pages 1-16.
    6. Gerardi, Kristopher & Rosenblatt, Eric & Willen, Paul S. & Yao, Vincent, 2015. "Foreclosure externalities: New evidence," Journal of Urban Economics, Elsevier, vol. 87(C), pages 42-56.
    7. Weiran Huang & Ashlyn Nelson & Stephen L. Ross, 2018. "Foreclosure Spillovers within Broad Neighborhoods," Working Papers 2018-096, Human Capital and Economic Opportunity Working Group.
    8. Simlai, Prodosh, 2019. "Subprime credit, idiosyncratic risk, and foreclosures," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 175-189.
    9. Geoffrey K. Turnbull & Arno J. van der Vlist, 2023. "After the Boom: Transitory and Legacy Effects of Foreclosures," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 422-442, February.
    10. Kanayama, Yuki & Sadayuki, Taisuke, 2021. "What types of houses remain vacant? Evidence from a municipality in Tokyo, Japan," Journal of the Japanese and International Economies, Elsevier, vol. 62(C).
    11. Youngme Seo & Michael Craw, 2017. "Is something better than nothing? The impact of foreclosed and lease-purchase properties on residential property values," Urban Studies, Urban Studies Journal Limited, vol. 54(16), pages 3681-3699, December.
    12. Yishen Liu & Anthony M. Yezer, 2021. "Foreclosure Externalities: Have We Confused the Cure with the Disease?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S2), pages 428-460, September.
    13. Sadayuki, Taisuke, 2018. "Measuring the spatial effect of multiple sites: An application to housing rent and public transportation in Tokyo, Japan," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 155-173.
    14. Michele Loberto, 2023. "Foreclosures and House Prices," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(1), pages 397-424, March.
    15. Ying Huang & Ronald W. Spahr & Mark A. Sunderman, 2020. "The Impact of Default and Foreclosure on Housing Values: Rings Vs. Neighborhoods Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 60(3), pages 338-374, April.
    16. Kanis Saengchote, 2023. "Developers' Leverage, Capital Market Financing, and Fire Sale Externalities Evidence from the Thai Condominium Market," Papers 2312.05013, arXiv.org.
    17. Tammy Leonard & Nikhil Jha & Lei Zhang, 2017. "Neighborhood price externalities of foreclosure rehabilitation: an examination of the Neighborhood Stabilization Program," Empirical Economics, Springer, vol. 52(3), pages 955-975, May.
    18. 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.
    19. Anthony Yezer, 2016. "Testing the Association between Foreclosure and Nearby House Values: Can Differences Deceive?," Working Papers 2016-29, The George Washington University, Institute for International Economic Policy.
    20. Kanis Saengchote, 2023. "Developers’ Leverage, Capital Market Financing, and Fire Sale Externalities: Evidence from the Thai Condominium Market," PIER Discussion Papers 212, Puey Ungphakorn Institute for Economic Research.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:anresc:v:62:y:2019:i:3:d:10.1007_s00168-019-00903-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.