Discussion Paper

Foreclosure's price-depressing spillover effects on local properties: a literature review

Abstract: The costs of foreclosure often spill over from foreclosed properties to other nearby properties. This short paper reviews some of the research on foreclosure's price-depressing impact on sales of nearby properties, only one of several forms of spillover effects. The studies reviewed here focus on various cities, use different datasets and methodologies, employ different assumptions, and cover different time periods. Their conclusions about foreclosure effects range from reducing nearby properties' sales value by as little as 0.9% to as much as 8.7%. Research also shows that negative spillover effects tend to diminish with distance and time, as does the marginal impact of each additional foreclosure. This paper also presents two studies with rough estimates on New England communities' possible losses from foreclosures' spillover effects on nearby property values.

Keywords: Foreclosure; Foreclosure - New England; Housing - Prices; Housing - Prices - New England;

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Public and Community Affairs Discussion Papers

Publication Date: 2008

Number: 2008-1