Neighborhood Effects of Concentrated Mortgage Foreclosures

36 Pages Posted: 19 Sep 2008  

Jenny Schuetz

City University of New York, CUNY City College of New York - Department of Economics

Vicki Been

New York University School of Law

Ingrid Gould Ellen

New York University (NYU) - Robert F. Wagner Graduate School of Public Service

Date Written: September 18, 2008

Abstract

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.

Suggested Citation

Schuetz, Jenny and Been, Vicki and Ellen, Ingrid Gould, Neighborhood Effects of Concentrated Mortgage Foreclosures (September 18, 2008). NYU Law and Economics Research Paper No. 08-41. Available at SSRN: https://ssrn.com/abstract=1270121 or http://dx.doi.org/10.2139/ssrn.1270121

Jenny Schuetz (Contact Author)

City University of New York, CUNY City College of New York - Department of Economics ( email )

Convent Avenue at 138th Street
New York, NY 10031
United States

Vicki Been

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
212-998-6223 (Phone)
212-995-4341 (Fax)

Ingrid Gould Ellen

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

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