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
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: Suggested Citation