The Impact of Default and Foreclosure on Housing Values: Rings Vs. Neighborhoods Approach

Ying Huang (), Ronald W. Spahr () and Mark A. Sunderman ()
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Ying Huang: University of South Alabama
Ronald W. Spahr: The University of Memphis
Mark A. Sunderman: The University of Memphis

The Journal of Real Estate Finance and Economics, 2020, vol. 60, issue 3, No 4, 338-374

Abstract: Abstract We use neighborhood boundaries, in addition to a concentric rings approach, to examine single family foreclosure spillover effects on residential sales in Shelby County, TN for 2001–16. We find that using more homogeneous neighborhoods provides better and more consistent results as compared to results of using conventional concentric rings boundaries. Applying hedonic modeling, 2SLS, two-way clustered residual models to account for spatial, temporal and locational effects, we control for market cycles, property characteristics and fixed effects including date of sale. We find significant negative non-linear convex foreclosure rate impacts on sales prices given different locational, shape and demographic neighborhoods. Neighborhoods with high chronic foreclosure rates sustain substantially higher negative price impacts, while those with both lower acute or chronic foreclosure rates show lower price impacts.

Keywords: Housing values; Mortgage default; Foreclosure (search for similar items in EconPapers)
JEL-codes: R31 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11146-018-9691-y

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