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Foreclosures and house prices

Author

Listed:
  • Michele Loberto

    (Bank of Italy)

Abstract

This paper studies the impact of foreclosures on house prices in Italy using a large dataset of listings. We estimate that the foreclosure discount is considerable, and this would suggest a high degree of market segmentation and limited spillovers from foreclosures to the market for non-foreclosed homes. However, we find that the entry of foreclosures into the market increases the propensity of home sellers to adjust their list price. Moreover, foreclosure listings have a significant and negative impact on the prices of non-foreclosed homes nearby. Our evidence is quantitatively consistent with the recent literature on the impact of foreclosures on the US housing market.

Suggested Citation

  • Michele Loberto, 2021. "Foreclosures and house prices," Temi di discussione (Economic working papers) 1325, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_1325_21
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2021/2021-1325/en_tema_1325.pdf
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    References listed on IDEAS

    as
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    3. Foote, Christopher L. & Gerardi, Kristopher & Willen, Paul S., 2008. "Negative equity and foreclosure: Theory and evidence," Journal of Urban Economics, Elsevier, vol. 64(2), pages 234-245, September.
    4. Michele Loberto & Andrea Luciani & Marco Pangallo, 2020. "What do online listings tell us about the housing market?," Papers 2004.02706, arXiv.org.
    5. Adam M Guren & Timothy J McQuade, 2020. "How Do Foreclosures Exacerbate Housing Downturns?," Review of Economic Studies, Oxford University Press, vol. 87(3), pages 1331-1364.
    6. 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.
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    10. Federica Ciocchetta & Wanda Cornacchia & Roberto Felici & Michele Loberto, 2016. "Assessing financial stability risks from the real estate market in Italy," Questioni di Economia e Finanza (Occasional Papers) 323, Bank of Italy, Economic Research and International Relations Area.
    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. 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.
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    More about this item

    Keywords

    house prices; foreclosures; neighborhood effects;
    All these keywords.

    JEL classification:

    • 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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