Declining foreclosure neighborhood effects over time

According to previous studies, residential foreclosures reduce the value of neighboring residential units and the initial negative effects decay over time and space. This study attempts to investigate the temporal path of the initial effects by following cohorts of single-family housing distressed sales (foreclosures and real estate owned sales) over time. A hedonic model estimation of single-family housing sales in Saint Louis County, Missouri, produced larger marginal impacts for new distressed sales in the year 2000 compared with the marginal impact of new distressed sales in 2007, that is, the marginal impact of new distressed sales is declining in at least one housing market. This result holds true for the distressed sale neighborhood impact, the effect of distress on the same unit's future sales price, and the discount on a distressed unit's current “liquidation sale” price.

[1]  S. Rosen.  Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition , 1974, Journal of Political Economy.

[2]  B. Case.  Housing Price Indexes , 2007 .

[3]  Michael H. Schill,et al.  Building Homes, Reviving Neighborhoods: Spillovers from Subsidized Construction of Owner-Occupied Housing in New York City , 2001 .

[4]  Harry H. Kelejian,et al.  A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model , 1999 .

[5]  Dan Immergluck,et al.  The Impact of Single-family Mortgage Foreclosures on Neighborhood Crime , 2006 .

[6]  Chengri Ding,et al.  The Effect of Residential Investment on Nearby Property Values: Evidence from Cleveland, Ohio , 2000 .

[7]  C. F. Sirmans,et al.  Estimating Bargaining Power in the Market for Existing Homes , 2003, Review of Economics and Statistics.

[8]  H. R. Neill,et al.  Effect of Foreclosure Status on Residential Selling Price: Comment , 1997 .

[9]  Craig Watkins.  Are new entrants to the residential property market informationally disadvantaged , 1998 .

[10]  Vicki Been,et al.  Neighborhood Effects of Concentrated Mortgage Foreclosures , 2008 .

[11]  Vincent W. Yao,et al.  Spillover Effects of Foreclosures on Neighborhood Property Values , 2009 .

[12]  Sudip Chattopadhyay.  Estimating the Demand for Air Quality: New Evidence Based on the Chicago Housing Market , 1999 .

[13]  Seung-Jun Kwak,et al.  The Choice of Functional Form and Variables in the Hedonic Price Model in Seoul , 1997 .

[14]  C. Sirmans,et al.  Information, search, and house prices , 1993 .

[15]  Anthony Pennington-Cross,et al.  The Value of Foreclosed Property , 2004 .

[16]  Vacant,et al.  SPATIAL ANALYSIS OF THE IMPACT OF VACANT , ABANDONED AND FORECLOSED PROPERTIES , 2008 .

[17]  D. Culhane,et al.  The Differential Impacts of Federally Assisted Housing Programs on Nearby Property Values: A Philadelphia Case Study , 1999 .

[18]  C. F. Sirmans,et al.  Do Owners Take Better Care of Their Housing Than Renters , 2000 .

[19]  Robert A. Simons,et al.  The Value Impact of New Residential Construction and Neighborhood Disinvestment on Residential Sales Price , 1998 .

[20]  William H. Rogers,et al.  The Impact of Foreclosures on Neighboring Housing Sales , 2009 .

[21]  David Geltner,et al.  Controlling for the Impact of Variable Liquidity in Commercial Real Estate Price Indices , 2003 .

[22]  Liang Peng,et al.  The Bias of the Rsr Estimator and the Accuracy of Some Alternatives , 2001 .

[23]  J. Carroll,et al.  The Effect of Sheriff’s Sales on Condominium Sub-Market Property Values , 2011 .

[24]  Kerry D. Vandell,et al.  Illiquidity and Pricing Biases in the Real Estate Market , 2007 .

[25]  G. Knaap,et al.  Property values in inner‐city neighborhoods: The effects of homeownership, housing investment, and economic development , 2002 .

[26]  M. Cropper,et al.  On the Choice of Functional Form for Hedonic Price Functions , 1988 .

[27]  K. Bell,et al.  Applying the Generalized-Moments Estimation Approach to Spatial Problems Involving Micro-Level Data , 2000, Review of Economics and Statistics.

[28]  L. Anselin.  Spatial Econometrics: Methods and Models , 1988 .

[29]  Fred A. Forgey,et al.  Effect of Foreclosure Status on Residential Selling Price , 2009 .

[30]  Dan Immergluck,et al.  The external costs of foreclosure: The impact of single‐family mortgage foreclosures on property values , 2006 .

[31]  Marvin L. Wolverton,et al.  The Relationship between Foreclosure Status and Apartment Price , 2009 .

[32]  R. Halvorsen,et al.  Choice of functional form for hedonic price equations , 1981 .

[33]  Dan Immergluck.  The accumulation of foreclosed properties: trajectories of metropolitan REO inventories during the 2007–2008 mortgage crisis , 2008 .

[34]  Raymond J.G.M. Florax,et al.  The Performance of Diagnostic Tests for Spatial Dependence in Linear Regression Models: A Meta-Analysis of Simulation Studies , 2004 .

[35]  John D. Benjamin,et al.  Estimating Net Realizable Value for Distressed Real Estate , 1990 .