What Happens in Vegas Doesn't Always Stay in Vegas: The Dynamics of House Prices and Foreclosure Rates Across Space and Time

42 Pages Posted: 19 Jun 2020

See all articles by Hua Kiefer

Hua Kiefer

FDIC

Leonard C. Kiefer

Federal Home Loan Mortgage Corporation (FHLMC)

Jie (Diana) Wei

Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Date Written: November 1, 2019

Abstract

This paper identifies instruments for house prices and foreclosure rates and estimates a Dynamic Spatial Simultaneous Equation System (DSSES) to investigate the dynamics of them across space and time. Shocks to the foreclosure rate in one state not only affect house prices in that state but also the foreclosure rates and house prices in nearby states. When it comes to the housing market, what happens in Vegas doesn’t always stay in Vegas. A one standard deviation foreclosure shock leads to a 2 percent decline in real house prices over the long run.

Keywords: Simultaneous Equation, Dynamic Panel, Spatial Spillover, House Price, Foreclosure

JEL Classification: C33, C36, R31

Suggested Citation

Kiefer, Hua and Kiefer, Leonard C. and Wei, Jie (Diana), What Happens in Vegas Doesn't Always Stay in Vegas: The Dynamics of House Prices and Foreclosure Rates Across Space and Time (November 1, 2019). FDIC Center for Financial Research Paper No. 2019-02, Available at SSRN: https://ssrn.com/abstract=3628569 or http://dx.doi.org/10.2139/ssrn.3628569

Hua Kiefer (Contact Author)

FDIC ( email )

550 17th Street NW
Washington, DC 20429
United States

Leonard C. Kiefer

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States

Jie (Diana) Wei

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street SW
Washington, DC 20219
United States

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