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Foreclosure Spillovers within Broad Neighborhoods

Author

Listed:
  • Weiran Huang

    (City of New York)

  • Ashlyn Nelson

    (University of Indiana)

  • Stephen L. Ross

    (University of Connecticut)

Abstract

This paper tests for the spillover effects of foreclosure within broad neighborhoods. The best evidence that foreclosures have causal, spillover effects on housing prices and future foreclosures suggest highly localized spillover effects that are modest in magnitude, but these effects could multiply when the density of spillovers is high leading to larger aggregate effects in broader neighborhoods. We test this proposition by developing a proxy for the fraction of housing units/mortgages that are expected to be in negative equity during the crises. This proxy exploits the timing of purchases in each tract during the run up to the crisis, and we show that our source of identification, within tract variation in purchases over time, is not predicted the observed mortgage attributes. Our estimates suggest that 67 percent of the increase in the across tract dispersion in the recording of new foreclosure recordings can be explained by the spillover effects of the contemporaneous stock of foreclosures.

Suggested Citation

  • Weiran Huang & Ashlyn Nelson & Stephen L. Ross, 2018. "Foreclosure Spillovers within Broad Neighborhoods," Working Papers 2018-096, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2018-096
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    Cited by:

    1. Chernick, Howard & Reschovsky, Andrew & Newman, Sandra, 2021. "The effect of the housing crisis on the finances of central cities," Journal of Housing Economics, Elsevier, vol. 54(C).
    2. Stephen L. Ross & Yuan Wang, 2022. "Mortgage Lenders and the Geographic Concentration of Foreclosures," Working Papers 2022-001, Human Capital and Economic Opportunity Working Group.

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    More about this item

    Keywords

    foreclosure; negative equity; neighborhood spillovers; mortgage; housing crisis;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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