Neighborhood Effects of Concentrated Mortgage Foreclosures
City University of New York, CUNY City College of New York - Department of Economics
New York University School of Law
Ingrid Gould Ellen
New York University (NYU) - Robert F. Wagner Graduate School of Public Service
September 18, 2008
NYU Law and Economics Research Paper No. 08-41
As the national mortgage crisis has worsened, an increasing number of communities are facing declining housing prices and high rates of foreclosure. Central to the call for government intervention in this crisis is the claim that foreclosures not only hurt those who are losing their homes to foreclosure, but also harm neighbors by reducing the value of nearby properties and in turn, reducing local governments' tax bases. The extent to which foreclosures do in fact drive down neighboring property values has become a crucial question for policy-makers. In this paper, we use a unique dataset on property sales and foreclosure filings in New York City from 2000 to 2005 to identify the effects of foreclosure starts on housing prices in the surrounding neighborhood. Regression results suggest that above some threshold, proximity to properties in foreclosure is associated with lower sales prices. The magnitude of the price discount increases with the number of properties in foreclosure, but not in a linear relationship.
Number of Pages in PDF File: 36
Date posted: September 19, 2008
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