The Effect of Foreclosures on Nearby Housing Prices: Supply or Disamenity?

30 Pages Posted: 4 Sep 2010 Last revised: 29 Oct 2014

Date Written: September 2, 2014

Abstract

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 disamenity stemming from deferred maintenance or vacancy. I estimate that each extra unit of supply decreases prices within 0.05 miles by about 1.2 percent while the disamenity stemming from a foreclosed property is near zero.

Keywords: foreclosure, housing prices, neighborhood effects

JEL Classification: H23, R20, R30

Suggested Citation

Hartley, Daniel A., The Effect of Foreclosures on Nearby Housing Prices: Supply or Disamenity? (September 2, 2014). FRB of Cleveland Working Paper No. 10-11r, Available at SSRN: https://ssrn.com/abstract=1670820 or http://dx.doi.org/10.2139/ssrn.1670820

Daniel A. Hartley (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://www.danielaaronhartley.com

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