EconStor >
Federal Reserve Bank of Atlanta >
Economic Review (Vol. 93-95), Federal Reserve Bank of Atlanta >

Please use this identifier to cite or link to this item:
Title:Estimating the effect of mortgage foreclosures on nearby property values: A critical review of the literature PDF Logo
Authors:Frame, W. Scott
Issue Date:2010
Citation:[Journal:] Economic Review, Federal Reserve Bank of Atlanta [ISSN:] 0732-1813 [Volume:] 95 [Year:] 2010 [No.:] 3
Abstract:In response to the wave of residential mortgage foreclosures in the past few years, federal, state and local government intervention programs have aimed to reduce the presumed social costs of foreclosures. Before the recent crisis, there was little economic research documenting foreclosure spillover effects. This article takes a critical look at the recent literature that seeks to estimate the negative effects of residential mortgage foreclosures. This review suggests that foreclosed properties sell at a discount, likely because such properties are in worse condition than surrounding properties. What's more, very nearby foreclosures appear to depress the sales prices of nondistressed properties, but this effect diminishes rapidly over physical distance and time. The author suggests that the considerable variation in foreclosure discount and spillover estimates that occurs from study to study may be related to data limitations (specific places and times) and poorly specified empirical models in some studies. He notes that studies using a repeat-sales approach seem to hold greater promise than those using hedonic regressions; the former approach is more likely to hold property and neighborhood characteristics constant and make it easier to examine multiple geographies and longer time periods.
Subjects:residential mortgages
foreclosure spillovers
negative externalities
Document Type:Article
Appears in Collections:Economic Review (Vol. 93-95), Federal Reserve Bank of Atlanta

Files in This Item:
File Description SizeFormat
683563785.pdf302.93 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.