Neighborhood effects of concentrated mortgage foreclosures

Jenny Schuetz, Vicki Been, Ingrid Gould Ellen

Research output: Contribution to journalArticle

Abstract

As the national mortgage crisis has worsened, an increasing number of communities are facing declining housing prices and high rates of foreclosure. Central to the call for government intervention in this crisis is the claim that foreclosures not only hurt those who are losing their homes to foreclosure, but also harm neighbors by reducing the value of nearby properties and in turn, reducing local governments' tax bases. The extent to which foreclosures do in fact drive down neighboring property values has become a crucial question for policy-makers. In this paper, we use a unique dataset on property sales and foreclosure filings in New York City from 2000 to 2005 to identify the effects of foreclosure starts on housing prices in the surrounding neighborhood. Regression results suggest that above some threshold, proximity to properties in foreclosure is associated with lower sales prices. The magnitude of the price discount increases with the number of properties in foreclosure, but not in a linear relationship.

Original languageEnglish (US)
Pages (from-to)306-319
Number of pages14
JournalJournal of Housing Economics
Volume17
Issue number4
DOIs
StatePublished - Dec 2008

Keywords

  • Foreclosures
  • Neighborhoods
  • Property values
  • Spillovers

ASJC Scopus subject areas

  • Economics and Econometrics

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