Are Foreclosure Spillover Effects Universal? Variation over Space and Time

34 Pages Posted: 25 Jul 2020

See all articles by Yung Chun

Yung Chun

Washington University in St. Louis

Stephanie Pierce

Ohio State University - John Glenn College of Public Affairs

Andrew Van Leuven

Ohio State University - John Glenn College of Public Affairs

Date Written: June 22, 2020

Abstract

Government intervention in the housing market was partially driven by research showing that foreclosures lower neighboring housing values and thus increase neighbors’ risk of foreclosure. While prior research has consistently identified a negative spillover effect of foreclosures on nearby housing values, the magnitude of the effect varies widely across studies. We argue that the spillover effect on nearby housing prices varies across space and over time. To capture the extent of spatial variation, we employ geographically weighted regression, which allows modeled relationships to vary locally within a geographic area. We find heterogeneous foreclosure spillover effects both across and within metropolitan areas and that the magnitude and range of said effects vary over time. These findings raise the possibility that policies and programs designed to intervene in the housing market analyze and use local variation in the negative externalities of foreclosure to best target scarce resources within and across communities.

Keywords: Foreclosure, Local Markets, Mortgages, Neighborhood, Spatial

JEL Classification: C31, G21, G40, R12, R31, R32

Suggested Citation

Chun, Yung and Pierce, Stephanie and Van Leuven, Andrew, Are Foreclosure Spillover Effects Universal? Variation over Space and Time (June 22, 2020). Available at SSRN: https://ssrn.com/abstract=3575879 or http://dx.doi.org/10.2139/ssrn.3575879

Yung Chun (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Stephanie Pierce

Ohio State University - John Glenn College of Public Affairs ( email )

110 Page Hall
1810 College Road
Columbus, OH 43210
United States

Andrew Van Leuven

Ohio State University - John Glenn College of Public Affairs ( email )

1810 College Road North
Columbus, OH 43210
United States

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