Contagion in Housing Markets

Jaime Luque
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Jaime Luque: 1University of Wisconsin-Madison, USA

Chapter 12 in The Subprime Crisis:Lessons for Business Students, 2017, pp 99-106 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Foreclosed homes that create a negative externality on surrounding house prices can attribute this fall in value to the impact foreclosed homes have on the comparable valuation approach. If homes in the neighborhood are foreclosed and subsequently sell for prices well below their original value, this brings down the price of all similar homes in the area. This, however, is not the only factor that causes a fall in home values. Externalities such as the appearance of a neighborhood with empty foreclosed homes, or the diminished social value of a city also induce a decrease in home prices. Understanding how these externalities function can help us gain insight into how we can internalize these externalities and reduce the negative spillover effects they project into communities…

Keywords: Subprime Crisis; Great Recession; 2009 Recession; Mortgage; Financial Market; Preventing Recession; 2009 Crisis; Interest Rates (search for similar items in EconPapers)
JEL-codes: G01 G1 (search for similar items in EconPapers)
Date: 2017
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