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Journal of Geographical Systems

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01.12.2009 | Original Article

The neighborhood effects of foreclosure

verfasst von: Tammy Leonard, James C. Murdoch

Erschienen in: Journal of Geographical Systems | Ausgabe 4/2009

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Abstract

Neighborhood quality is an important attribute of housing yet its value is rarely known to researchers. We argue that changes in nearby foreclosures reveal changes in neighborhood quality. Thus estimates of the hedonic price of nearby foreclosures provide a glimpse of values that people hold for local neighborhood quality. The empirical models include controls for both spatial dependence in housing prices and in the errors. The estimates indicate that nearby foreclosures produce externalities that are capitalized into home prices—an additional foreclosure within 250 feet of a sale negatively impacts selling price by approximately $1,666, ceteris paribus.

Vorheriger Artikel Recent research in spatial real estate hedonic analysis

Nächster Artikel A spatio-temporal model of housing prices based on individual sales transactions over time

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“Affordability” products include subprime loans or mortgages with interest only and payment option features.

According to the literature review in Edelberg (2003), in 1995 bank regulators implemented more stringent measures of Community Reinvestment Act (CRA) compliance that motivated the development of technology to facilitate lending in high-risk neighborhoods. This motivation along with decreasing costs of information storage and computing power resulted in innovations in credit pricing.

Default occurs when a borrower fails to make his/her mortgage payment. Not all defaults result in foreclosure, but all foreclosures necessarily began as a borrower default.

In this static model, the purchase price does not change.

Since N _i is considered a good, we assume that ∂A/∂N _i > 0.

A small percentage of the sales are in Collin, Denton, Ellis, and Tarrant Counties because the boundaries of some of the cities in Dallas County extend into other counties.

Ambrose and Capone (2000) found elevated risk of another default within 2 years of foreclosure.

The number of observations was 23,960, 27,273, 28,549, and 26,456, respectively.

All of these values are determined with the natural log of price so that they are in the same units as the dependent variable.

In a regression without OWN but with OWNOCC_BG, we found that the addition of OWN′ to the regression caused the effect of OWNOCC_BG to fall by approximately 67%.

The spatial multiplier for a spatial lag model is calculated as (1 − W ₀₆ ρ)⁻¹, but this reduces to (1 − ρ)⁻¹ when the weight matrix is standardized (Kim et al. 2003).

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Gaines JP (2007) Preserving homeownership: addressing the foreclosure issue. Presentation given at the Federal Reserve Bank of Dallas Preserving Homeownership conference on 12 June 2007

Immergluck D, Smith G (2005) There goes the neighborhood: the effect of single-family mortgage foreclosures on property values. Woodstock Institute. http://www.woodstockinst.org/component/option.com/. Accessed 6 Sept 2007

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Kelejian HH, Prucha IR (2006) Specification and estimation of spatial autoregressive models with autoregressive and heteroskedastic disturbances. http://www.albany.edu/economics/Research/fall06/1208.pdf. Accessed 2 Jan 2009

Kim CW, Phipps TT, Anselin L (2003) Measuring the benefits of air quality improvement: a spatial hedonic approach. J Environ Econ Manag 45:24–39CrossRef

Lin Z, Rosenblatt E, Yao VW (2009) Spillover effects of foreclosures on neighborhood property values. J Real Estate Finance Econ 34(4):387–407

Páez A, Long F, Farber S (2008) Moving average approaches for hedonic price estimation. Urban Stud 45(8):1565–1581CrossRef

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United States Foreclosure Law (2007) Texas foreclosure law summary. http://www.foreclosurelaw.org/Texas_Foreclosure_Law.htm. Accessed 20 Oct 2007

US Census Bureau (2007) Housing vacancy survey. http://www.census.gov/hhes/www/housing/hvs/hvs.html. Accessed 2 Aug 2007

Titel: The neighborhood effects of foreclosure
verfasst von: Tammy Leonard
James C. Murdoch
Publikationsdatum: 01.12.2009
Verlag: Springer-Verlag
Erschienen in: Journal of Geographical Systems / Ausgabe 4/2009
Print ISSN: 1435-5930
Elektronische ISSN: 1435-5949
DOI: https://doi.org/10.1007/s10109-009-0088-6

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