Neighborhood Sorting Dynamics in Real Estate: Evidence from the Virginia Sex Offender Registry

30 Pages Posted: 10 Oct 2013 Last revised: 6 Oct 2020

See all articles by Xun Bian

Xun Bian

Longwood University

Raymond Brastow

Federal Reserve Banks - Federal Reserve Bank of Richmond

Bennie D. Waller

Longwood University

Michael Stoll

Vistar Technologies

Scott Wentland

Bureau of Economic Analysis (BEA)

Date Written: October 2, 2020

Abstract

Given the potential risk of recidivism, recent research has found that registered sex offenders impose external costs that are capitalized into the value (lower prices) and liquidity (longer time on market) of nearby residential real estate. Using more than a decade of real estate listings data and a unique data set of registered sex offenders (RSOs) in Virginia, we extend this literature by investigating how real estate markets respond to clustering of this particular group and whether there is evidence of market prices facilitating clustering phenomena. Employing a difference-in-difference approach within a hedonic empirical framework, the results show that the housing market has a nonlinear response to clusters, as it considerably discounts prices of homes located near a cluster (4+) of RSOs, providing a market incentive for further sorting/clustering. Our empirical findings and supplemental geospatial analysis are consistent with a sorting/tipping model in which individuals choose residential locations according to preferences and price incentives. Insofar as clustering of negative externalities is efficient, we further discuss the market efficiency implications in this context.

Keywords: externalities, residential real estate, neighborhood tipping, sorting, sex offenders, spatial cluster

JEL Classification: R12, H23, R23, D62

Suggested Citation

Bian, Xun and Brastow, Raymond and Waller, Bennie D. and Stoll, Michael and Wentland, Scott, Neighborhood Sorting Dynamics in Real Estate: Evidence from the Virginia Sex Offender Registry (October 2, 2020). Available at SSRN: https://ssrn.com/abstract=2338223 or http://dx.doi.org/10.2139/ssrn.2338223

Xun Bian

Longwood University ( email )

201 High Street
Farmville, VA 23901
United States
(434) 395-2231 (Phone)
(434) 395-2203 (Fax)

Raymond Brastow

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Bennie D. Waller

Longwood University ( email )

201 High Street
Farmville, VA 23909
United States
434-395-2046 (Phone)
434-395-2203 (Fax)

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

Michael Stoll

Vistar Technologies ( email )

Scott Wentland (Contact Author)

Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

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