The Effect of Foreclosures on Nearby Housing Prices: Supply or Disamenity
|WP 10-11||Revisions: WP 10-11R|
A number of studies have measured negative price effects of foreclosed residential properties on nearby property sales. However, only one other study addresses which mechanism is responsible for these effects. I measure separate effects for different types of foreclosed properties and use these estimates to decompose the effects of foreclosures on nearby home prices into a component that is due to additional available housing supply and a component that is due to disamenity stemming from deferred maintenance or vacancy. I estimate that each extra unit of supply decreases prices within 0.05 miles by about 1.2 percent while the disamenity stemming from a foreclosed property is near zero.
Key words: foreclosure, housing prices, neighborhood effects.
JEL codes: H23, R20, R30.