The heterogeneous spatial impact of foreclosures on nearby property values

Abstract

Foreclosures have negative impacts not just on homeowners, but also on neighboring properties. Due to the heterogeneous characteristics of the housing market, different neighborhoods can be impacted differently by foreclosures. This study focuses on the varying impacts of foreclosures on nearby property values across space. These results can provide insightful directions for decision makers to identify places in greatest need. A semi-parametric approach is applied to allow estimates varying over space. In Chicago, property values most impacted by foreclosures are in the south where the vacancy rate and crime occurrences are high and incomes are low. The spatial variation in impacts is wider for homes priced at the 10th quantile than at the 90th quantile. Moreover, the impacts are generally larger for home prices at the 10th quantile than at the 90th quantile, but the differences are not uniform across space.