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Foreclosure Spillovers within Broad Neighborhoods

Weiran Huang, Ashlyn Nelson and Stephen Ross ()
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Weiran Huang: City of New York
Ashlyn Nelson: University of Indiana

No 2018-096, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: This paper tests for the spillover effects of foreclosure within broad neighborhoods. The best evidence that foreclosures have causal, spillover effects on housing prices and future foreclosures suggest highly localized spillover effects that are modest in magnitude, but these effects could multiply when the density of spillovers is high leading to larger aggregate effects in broader neighborhoods. We test this proposition by developing a proxy for the fraction of housing units/mortgages that are expected to be in negative equity during the crises. This proxy exploits the timing of purchases in each tract during the run up to the crisis, and we show that our source of identification, within tract variation in purchases over time, is not predicted the observed mortgage attributes. Our estimates suggest that 67 percent of the increase in the across tract dispersion in the recording of new foreclosure recordings can be explained by the spillover effects of the contemporaneous stock of foreclosures.

Keywords: foreclosure; negative equity; neighborhood spillovers; mortgage; housing crisis (search for similar items in EconPapers)
JEL-codes: G20 R20 R30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2018-12
Note: MIP
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