Neighborhood impact of foreclosure: A quantile regression approach

Abstract

This paper uses quantile regression, while accounting for spatial autocorrelation, to examine the simultaneous space-time impact of foreclosures on neighborhood property values. We find that negative price externalities associated with neighborhood foreclosures are greatest (1) among lower-priced homes, (2) within 250 feet of the property and (3) in the 12 months following a foreclosure auction. By using quantile regression, we are able to also investigate changes in the distribution of house prices associated with varying levels of neighborhood foreclosures.

Time and distance heterogeneity in the neighborhood spillover effects of foreclosed properties

“…By closely following the space-time approach of Harding et al (2009), we are able to compare our results for the 2 different types of foreclosure processes with those estimated for the "average" foreclosure process. In related work, the space-time approach of Harding et al (Zhang & Leonard, 2014) and we can compare our results to this work as well.…”

“…Wassmer (2011) Comparison of the magnitudes of estimated foreclosure price externalities reveals that the negative impacts are quite diffuse and certainly neighborhood price externalities appear to vary across markets. Zhang and Leonard (2014) documented heterogeneity in the neighborhood price impacts of foreclosure within a single market by estimating a quantile regression model. However, evidence regarding the heterogeneity of the foreclosure impact on neighborhood sales according to duration of the foreclosure process is lacking.…”

Neighborhood price externalities of foreclosure rehabilitation: an examination of the Neighborhood Stabilization Program

“…The magnitude of the neighborhood price externality far exceeded (in absolute value) the effects estimated in Dallas County for foreclosures in general (-.5% price impact within 250 feet) (Leonard and Murdoch, 2009) and those estimated in the poorest neighborhoods (3.5% price impact within 250 feet) (Zhang and Leonard, 2014). Additionally, the effect size for NSP-property externalities, was comparable (in absolute value) to the effect size estimated for properties that spent the longest time in the foreclosure process (-19% price impact within 250 feet) (Zhang et al, 2015).…”

“…Properties with a larger degree of deterioration or blight (Fisher et al, 2015), longer foreclosure processes (Zhang et al, 2015;Daneshvary and Clauretie, 2012), and lower relative home values (Zhang and Leonard, 2014) have all been found to be associated with larger neighborhood price externalities compared to other properties in the same urban housing market. This suggests that foreclosure rehabilitation programs might be expected to produce positive neighborhood price externalities at least as great as the average local negative price externalities associated with foreclosure because they target for rehabilitation foreclosed properties in the most vulnerable neighborhoods and with the poorest conditions.…”

“…Numerous studies have robustly shown that residential property foreclosures produce negative neighborhood price externalities (e.g., Campbell et al, 2011;Lee, 2008;Schuetz et al, 2008;Zhang and Leonard, 2014;Lin et al, 2009;Harding et al, 2009;Hartley, 2014;Rogers and Winter, 2009;Immergluck and Smith, 2006;Leonard and Murdoch, 2009). In the wake of the [2007][2008][2009] financial recession, several programs emerged to rehabilitate foreclosed properties with the implied objective of stemming deleterious neighborhood price effects.…”