Heterogeneity in the Neighborhood Spillover Effects of Foreclosed Properties

In this paper we examine heterogeneity in the simultaneous space-time impact of foreclosures on neighborhood property values. The heterogeneity arises from foreclosed properties that experienced different types of foreclosure outcomes. We find that for foreclosures that are not observed to have concluded with a market sale, the negative price impacts begin while the foreclosing household still has ownership of the property then start to diminish 6 months after the bank has taken possession of the property. However, for foreclosures which are observed to have a subsequent market sale, the price impacts do not occur until at least 6 months after the foreclosing household has lost ownership of the property. Further, houses that experience a market sale within 6 months of the household losing ownership of the property are associated with small neighborhood price effects. ∗Corresponding author. Address: University of Texas at Dallas; School of Economic, Political and Policy Sciences; 800 W. Campbell Rd.; Richardson, TX 75080. Phone: (972) 883-4989. Email: [email protected].