Exploring the Foreclosure Contagion Effect Using Agent-Based Modeling

Marshall Gangel (), Michael Seiler () and Andrew Collins ()

The Journal of Real Estate Finance and Economics, 2013, vol. 46, issue 2, 339-354

Abstract: Over the last several years, the United States has experienced a significant recession. During this downturn, the number of real estate foreclosures has risen drastically. Recent studies have demonstrated a reduction in property values due to neighboring foreclosures—known as the foreclosure contagion effect. This study uses an agent-based modeling approach to explore market-wide emergent behavior that results from the interconnected property-agent behavior. Specifically, we find that the magnitude of the foreclosure contagion effect is a less powerful cause of eventual market collapse than the time a foreclosed property is allowed to linger on the market. This is important because disposition time is much easier to address from a policymaker perspective than is the strength of the foreclosure contagion effect. Copyright Springer Science+Business Media, LLC 2013

Keywords: Foreclosure contagion effect; Disposition time; Agent-based modeling (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s11146-011-9324-1

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