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Estimates of the size and source of price declines due to nearby foreclosures: evidence from San Francisco

  • Elliot Anenberg
  • Edward Kung
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    Using a novel dataset which merges real estate listings with real estate transactions in San Francisco from 2007-2009, we present new evidence that foreclosures causally depress nearby home prices. We show that this decrease occurs only after the foreclosed home is listed for sale, which suggests that the effect is due to the additional housing supply created by foreclosure rather than from neglect of the foreclosed property. Consistent with a framework where a foreclosed home simply increases supply, we find that new listings of foreclosed homes and non-foreclosed homes each lower sales prices of homes within 0.1 miles of the listing by 1 percent.

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    File URL: http://www.federalreserve.gov/pubs/feds/2012/201284/201284abs.html
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    File URL: http://www.federalreserve.gov/pubs/feds/2012/201284/201284pap.pdf
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    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2012-84.

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    Date of creation: 2012
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    Handle: RePEc:fip:fedgfe:2012-84
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    1. Ortalo-Magné, François & Rady, Sven, 2005. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraint," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 50, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Daniel Hartley, 2011. "The effect of foreclosures on nearby housing prices: supply or disamenity?," Working Paper 1011, Federal Reserve Bank of Cleveland, revised 01 Sep 2014.
    3. Geoffrey Turnbull & Jonathan Dombrow, 2006. "Spatial Competition and Shopping Externalities: Evidence from the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 32(4), pages 391-408, June.
    4. Springer, Thomas M, 1996. "Single-Family Housing Transactions: Seller Motivations, Price, and Marketing Time," The Journal of Real Estate Finance and Economics, Springer, vol. 13(3), pages 237-54, November.
    5. John Y. Campbell & Stefano Giglio & Parag Pathak, 2011. "Forced Sales and House Prices," American Economic Review, American Economic Association, vol. 101(5), pages 2108-31, August.
    6. 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.
    7. 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.
    8. Robert Novy-Marx, 2009. "Hot and Cold Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(1), pages 1-22.
    9. Krainer, John, 2001. "A Theory of Liquidity in Residential Real Estate Markets," Journal of Urban Economics, Elsevier, vol. 49(1), pages 32-53, January.
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