The Spatial-Temporal Impact of Residential Foreclosures on Single-Family Residential Property Values

Abstract

As the home mortgage foreclosure crisis continues to spread, few households and geographic locations in the United States remain unaffected. This has led to a great deal of research on the causes and the impacts of the foreclosure crisis. This article focuses on the latter and specifically addresses the impact that residential foreclosures have on nearby single-family residential properties. Previous research has concluded that there is a negative impact. Although the hypothesis for this article has not changed, the authors offer a change in methodology. The study analyzes foreclosures' impact based upon face blocks, not straight-line distances, and it also incorporates time and the use of spatial statistics. Findings from this study show a negative relationship between the length of time a property has been foreclosed and its effect on neighboring property values. The first negative impact is seen after one year, and sheriff sales have a greater negative impact than preforeclosures. Therefore, policy responses need to be as swift as possible to prevent any negative impact on neighboring property values and all the while must attempt to prevent properties from going to auction.

Do Homeowners Associations Mitigate or Aggravate Negative Spillovers from Neighboring Homeowner Distress?

“…Introduction Scholarly work and popular media have paid great attention to the impact of foreclosures on the housing market; in particular, their effect on the prices of neighboring homes (see, for example, Immergluck and Smith 2006; Leonard and Murdoch 2007;Kobie and Lee 2011;Rogers and Winter 2009;Harding, Rosenblatt, and Yao 2009;Lin, Rosenblatt, and Yao 2009;and Campbell, Giglio, and Pathak 2011). While this research generally finds that proximity of foreclosure negatively affects sales price, there is still some uncertainty as to the causal mechanism.…”

“…Houses trade at slightly lower prices when there are homes nearby with delinquent homeowners, when there are homes nearby owned by lenders, and even when there are homes nearby recently sold by lenders in arm's length transactions. Kobie and Lee (2011) examine the relationship between residential foreclosures and property values with respect to space and time. An innovation in their paper is the spatial definition of a neighbor, which is based on being on the same face block.…”

From Financialization to Sociospatial Polarization of the City? Evidence fromCanada

“…This situation has produced new forms of compounding “neighborhood effects,” since the social displacement wrought by foreclosures affects not only real estate values but the quality of schools and local crime rates, among other things (Been et al. ; Immergluck and Smith ; Immergluck ; Kaplan and Sommers ; Kobie and Lee ; Leonard and Murdoch ; Li and Morrow‐Jones ; for a critique of the mainstream neighborhood effects literature, see Slater, ). It is notable that many newer suburban communities on the fringes of U.S. metropolitan areas, including those consisting of middle‐ and working‐class households, also exhibit high rates of foreclosures, suggesting a shift in the general patterning of urban restructuring (Immergluck , ).…”

Assessing the Role of Mortgage Fraud, Confluence, and Spillover in the Contemporary Foreclosure Crisis

“…These complications point to the potential utility of other policy choices that might limit the contagious nature of foreclosure properties. For example, Gangel, Seiler, and Collins (2011) and Kobie and Lee (2011) present evidence that policies aimed at accelerating the foreclosure completion process might be beneficial for reducing the geographic spread of foreclosures.…”