Foreclosures, House Prices, and the Real Economy

69 Pages Posted: 18 Jan 2011 Last revised: 5 Aug 2022

See all articles by Atif R. Mian

Atif R. Mian

Princeton University - Department of Economics; Princeton University - Princeton School of Public and International Affairs; NBER

Amir Sufi

University of Chicago - Booth School of Business; NBER

Francesco Trebbi

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

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Date Written: January 2011

Abstract

States without a judicial requirement for foreclosures are twice as likely to foreclose on delinquent homeowners. Comparing zip codes close to state borders with differing foreclosure laws, we show that foreclosure propensity and housing inventory jump discretely as one enters non-judicial states. There is no jump in other homeowner attributes such as credit scores, income, or education levels. The increase in foreclosure rates in non-judicial states persists for at least five years. Using the judicial / non-judicial law as an instrument for foreclosures, we show that foreclosures lead to a large decline in house prices, residential investment, and consumer demand.

Suggested Citation

Mian, Atif R. and Sufi, Amir and Trebbi, Francesco, Foreclosures, House Prices, and the Real Economy (January 2011). NBER Working Paper No. w16685, Available at SSRN: https://ssrn.com/abstract=1740314

Atif R. Mian (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Princeton University - Princeton School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Amir Sufi

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Francesco Trebbi

University of California, Berkeley - Haas School of Business ( email )

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2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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