Journal Article

The impact of foreclosures on the housing market

Abstract: A record number of mortgage loans are either in default or in danger of being defaulted upon. Many of the properties that back these loans will end up going through the foreclosure process. A growing body of research shows that foreclosed homes sell at a discount and that foreclosures have a negative impact on the value of other homes that are nearby. The effect on nearby property values happens for two different reasons, but my recent work suggests that one or the other predominates depending on certain characteristics of the neighborhood where the foreclosures are occurring. This finding implies that different approaches might be required to mitigate the negative effects of foreclosures in different neighborhoods.

Keywords: Foreclosure; Housing - Finance; Mortgage loans;

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2010

Issue: Oct

Order Number: 15