The effect of foreclosures on nearby housing prices: Supply or dis-amenity?

A number of studies have measured negative price effects of foreclosed residential properties on nearby property sales. However, only one other study addresses which mechanism is responsible for these effects. I measure separate effects for different types of foreclosed properties and use these esti...

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Bibliographic Details
Published in:Regional science and urban economics 2014-11, Vol.49, p.108-117
Main Author: Hartley, Daniel
Format: Article
Language:English
Subjects:
Economic analysis
Economic forecasts
Estimation
Foreclosure
Housing
Housing prices
Impact analysis
Real estate
Real estate sales
Spillover
Studies
Supply
Urban economics
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Summary:A number of studies have measured negative price effects of foreclosed residential properties on nearby property sales. However, only one other study addresses which mechanism is responsible for these effects. I measure separate effects for different types of foreclosed properties and use these estimates to decompose the effects of foreclosures on nearby home prices into a component that is due to additional available housing supply and a component that is due to dis-amenity stemming from deferred maintenance or vacancy. I estimate that each extra unit of supply decreases prices within 0.05 miles by about 1.2% while the dis-amenity stemming from a foreclosed property is near zero. •Measure spillover effects of foreclosures on nearby home prices.•Decompose measured effects into a supply component and a dis-amenity component.•Supply effect is about −1.2% per foreclosure within 0.05 miles. Disamenity effect is about zero.
ISSN:0166-0462
1879-2308
DOI:10.1016/j.regsciurbeco.2014.09.001