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Foreclosures, House Prices, and the Real Economy

Listed author(s):
  • Atif Mian
  • Amir Sufi
  • Francesco Trebbi

States without a judicial requirement for foreclosures are twice as likely to foreclose on delinquent homeowners. Comparing zip codes close to state borders with differing foreclosure laws, we show that foreclosure propensity and housing inventory jump discretely as one enters non-judicial states. There is no jump in other homeowner attributes such as credit scores, income, or education levels. The increase in foreclosure rates in non-judicial states persists for at least five years. Using the judicial / non-judicial law as an instrument for foreclosures, we show that foreclosures lead to a large decline in house prices, residential investment, and consumer demand.

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File URL: http://www.nber.org/papers/w16685.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16685.

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Date of creation: Jan 2011
Publication status: published as Atif Mian & Amir Sufi & Francesco Trebbi, 2015. "Foreclosures, House Prices, and the Real Economy," Journal of Finance, American Finance Association, vol. 70(6), pages 2587-2634, December.
Handle: RePEc:nbr:nberwo:16685
Note: EFG
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