Most prior research testing the hypothesis of the social disorganization theory that residential instability increases crime has used cross-sectional data. Using a unique dataset linking home sales address matched to census tracts with crime data in Los Angeles, we test the direction of this relationship using a six-year panel data design. We also test whether crime acts as a generator of transition and decline in neighborhoods by testing its eff ect on property values the following year. Our fi ndings suggest little evidence that home sales volatility in one year leads to more property or violent crime the following year. Instead, higher levels of tract property and violent crime in one year lead to more home sales the following year. Th is eff ect of high crime rates is exacerbated in tracts with high levels of racial/ ethnic heterogeneity, suggesting that such tracts may engender a distinct combination of fear and uncertainty in their residents, leading to more turn over. We also fi nd that tracts with more violent crime one year have lower property values the following year, suggesting a general process of decline.Given the numerous studies demonstrating that neighborhood characteristics infl uence a variety of behaviors and outcomes at the individual level (for a review, see Sampson et al. 2002), social scientists have expended considerable effort in trying to understand the social processes responsible for these relationships. Though the majority of ecological research has focused on the impact of concentrated disadvantage as the primary structural dimension that affects outcomes, the roles of residential stability and home ownership, along with ethnic heterogeneity, have also garnered signifi cant attention. Each of these is explicitly linked to mobility, as the fl ow of people into and out of neighborhoods transforms neighborhoods. With respect to local levels of disadvantage/affl uence, scholars have therefore studied the characteristics of the populations that leave, stay, or enter anew into a neighborhood to explain why some neighborhoods experience an economic downward spiral (Wilson 1987)