Most previous empirical research estimates a greater than 20% discount associated with the sale of foreclosed properties. Under the assumption that the real estate market is somewhat efficient, such a large discount would be counterintuitive. We argue, and empirically show, that the estimated foreclosure coefficients in most of the previous research are upward biased because they do not control for variables such as the physical condition of the property and the relationship between marketing time and price. Accounting for these factors and correcting for two types of spatial price interdependence, our results show that estimates of foreclosure discount reported by previous studies are about one-third higher than the true discount caused by foreclosure "per se". Copyright (c) 2009 American Real Estate and Urban Economics Association.

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This paper examines the equity returns and bond prices of firms around the dates of their placement on CreditWatch by Standard and Poor's. Bond prices and equity returns for companies listed on CreditWatch are compared with a set of firms whose debt was rerated during the same time period but were never placed on CreditWatch. The evidence indicates no market reaction when firms are listed on CreditWatch with subsequent rating affirmations, but a significant reaction exists in those cases where the listing was followed by downgradings. Furthermore, the bond market does not appear so efficient as the stock market since relative bond prices continue to decline as long as seven months after a rating change.

This article extends the analysis concerning the impact of neighborhood churches on residential property values by investigating nearly 5,000 residential property transactions in Henderson, Nevada, between January 1986 and December 1990. We find that real property values decrease, at a decreasing rate, as distance from a neighborhood church increases. This result is the opposite of that reported by Do, W'tibur, and Short in a previous edition of this journal. We bolster our findings by showing that distance from the site of a future church has little or no impact on residential property values, whereas distance from an existing church is associated with lower property values. Our evidence indicates that neighborhood churches are amenities that enhance the value of neighborhood residential property. Finally, we demonstrate that larger churches (as measured by square foot of lot size) tend to have a greater positive impact on residential property values.In a recent article in this journal, Do, Wilbur, and Short (1994) (hereafter referred to as DWS) reported that a church can constitute a negative externality on residential property values much as does a powerline, hazardous waste dump, landfill, or nuclear waste repository. 1 That a church should, a priori, constitute a negative externality is not clear, however. Although DWS suggest that such items as increased traffic or the noise of church bells 2 may produce a negative effect, churches can also be viewed as amenities, much like shopping centers and quality schools. It is well-known that where there exist desirable neighborhood amenities, the value of which are reflected in property prices. 3 In the case of churches, one could hypothesize, for example, that elderly homeowners, religious because of their temporal proximity to meeting Him or Her and loathe to drive, may place a high value on being within walking distance to their house of worship. Other, equally appealing reasons can be offered suggestive of a positive effect on property values. 4If a church can be seen, a priori, equally as a positive or as a negative externality, then certain questions arise. Why did DWS obtain the results that they did? Would other tests in other localities produce the same result? Can all churches (denominations) be seen as either negative or positive externalities? 5 Is there a difference in the relationship between church locations and property values if the sale of the home occurs before or after the construction of the church building?

Previous research on mortgage default has focused on the costs, benefits, and characteristics of the mortgagor. In such studies default rates have been taken as a measure of mortgage risk. In this paper we present a model where the position of the lender affects the default-foreclosure process. Important to the lender's decision to foreclose rather than renegotiate an existing loan are the value of mortgage and the legal costs associated with foreclosure.The empirical evidence supports the hypothesis that both the value of the mortgage and legal foreclosure costs affect the foreclosure rate. In those states where legal foreclosure costs are high rates are significantly less than where costs are low. This suggests that previous models which include only the costs and benefits of default to the borrower are incomplete and that foreclosure rates can not be taken as a strict measure of mortgage risk. That is, low foreclosure rates may indicate that losses occur in other forms of loan negotiation rather than in expensive legal costs. Copyright American Real Estate and Urban Economics Association.