Housing submarkets and the impacts of foreclosures on property prices

The dramatic rise in the number of foreclosed properties since 2006 has come to assume the proportions of a national crisis. It is widely acknowledged that foreclosures hurt neighborhoods by devaluing the nearby properties through various channels. This paper offers a new way of conceptualizing and then estimating the potential effects of foreclosures on property values. Housing stock heterogeneity in the central city old neighborhood allows for the possibility that the impacts of nearby foreclosures may differ across types of housing. This study uses a dataset that covers twenty years of housing values from the City of Worcester (MA), and finds evidence that foreclosures of multi-family houses in close proximity influence the sales price of surrounding single-family properties after controlling for impact from foreclosure of nearby single-family houses. The most preferred estimate suggests that each multi-family foreclosure that occurs between 660 and 1320 feet away from the sale lowers the predicted sales price by approximately 3%. Nearby multi-family spillover impacts also persist over time. In addition, a new approach advocating for an alternative definition of housing submarket suggests that a distant foreclosure within the same submarket also lower sales price of a single-family home by 0.1%.     

The contagion effect of foreclosed properties

Although previous research shows that prices of homes in neighborhoods with foreclosures are lower than those in neighborhoods without foreclosures, it remains unclear whether the lower prices are the result of a general decline in neighborhood values or whether foreclosures reduce the prices of nearby non-distressed sales through a contagion effect. We provide robust evidence of a contagion discount by simultaneously estimating the local price trend and the incremental price impact of nearby foreclosures. At its peak, the discount is roughly 1% per nearby foreclosed property. The discount diminishes rapidly as the distance to the distressed property increases. The contagion discount grows from the onset of distress through the foreclosure sale and then stabilizes. This pattern is consistent with the contagion effect being the visual externality associated with deferred maintenance and neglect.     

Deconstructing distressed-property spillovers: The effects of vacant,tax-delinquent,and foreclosed properties in housing submarkets

In this empirical analysis, we estimate the impacts of property-tax delinquency, vacancy, and foreclosures on the value of neighboring homes. We demonstrate that these externalities differ in high- and low-poverty submarkets. Numerous studies have estimated the externality of foreclosures. These papers theorize that the foreclosure impact works partially through creating vacant and neglected homes. To our knowledge, this is only the second attempt to estimate the impact of vacancy itself and the first to use tax-delinquency as a measure of property neglect. We link vacancy observations from Postal Service data with property-tax delinquency and sales data from Cuyahoga County, Ohio. We find that an additional property within 500 ft that is vacant or delinquent reduces a home’s selling price by 1 to 2%. In low-poverty submarkets, the negative impact of a home that is both vacant and delinquent is ?4.6%. Low-poverty submarkets penalize a sale near a tax-current recent foreclosure by 4 to 8%. In high-poverty submarkets, we observe positive correlations of sale prices with vacant foreclosures. This may reflect lenders selectively foreclosing only on relatively well-maintained properties.     

Do foreclosures cause crime?

The mortgage foreclosure crisis has generated increasing concerns about the effects of foreclosed properties on their surrounding neighborhoods, and on criminal activity in particular. There are a number of potential ways in which a foreclosed property might increase the payoffs to committing crime and decrease the likelihood of being caught, including reduced maintenance, residential turnover, and vacancy. Using point-specific, longitudinal crime, foreclosure, and other property data from New York City, this paper determines whether foreclosed properties affect criminal activity on the surrounding blockface – an individual street segment including properties on both sides of the street. We find that additional foreclosures on a blockface lead to additional total crimes, violent crimes and public order crimes. These effects appear to be largest when foreclosure activity is measured by the number of foreclosed properties that are on their way to an auction or have reverted to bank ownership. We find that effects are largest in neighborhoods with moderate or high levels of crime, and on blockfaces with concentrated foreclosure activity.     

Property value impacts of foreclosed housing acquisitions under uncertainty

Community development corporations seek to stabilize neighborhoods affected by the recent foreclosure crisis through acquisition and redevelopment of distressed properties. One rationale for this work is the alleviation or avoidance of negative foreclosure impacts. We estimate the lost value to proximate properties associated with a single foreclosure through a Markov chain representing probabilistic transitions between foreclosure stages. We apply our model to a case study of foreclosure properties in Chelsea, MA. A rank ordering by estimated property value impacts indicates significant potential gains in social value as compared to current community development practice. We extend our basic model to address the effects of clusters of foreclosed units upon the value of proximate properties. This study provides additional support for the use of decision modeling in foreclosed housing acquisition and redevelopment.     

Just the facts: An initial analysis of subprime’s role in the housing crisis

Using two large proprietary datasets from New England, this paper establishes some basic facts about the subprime crisis. First, while unaffordable interest-rate resets are often blamed for setting off this crisis, most subprime borrowers who defaulted did so well in advance of their reset dates. Defaults on subprime adjustable-rate mortgages are more sensitive to declining housing prices than are defaults on fixed-rate loans, however, and the data support a number of alternative explanations for this finding. Second, many borrowers with good credit scores took out subprime loans as the housing boom gathered steam. It is hard to construct a prima facie case that these borrowers were inappropriately steered into the subprime market, however, because the loans that these borrowers took out were too risky for prime treatment. Finally, 70% of Massachusetts homes recently lost to foreclosure were originally purchased with prime mortgages. But subprime refinancing is especially prevalent among owners who were likely to have extracted substantial amounts of equity before they defaulted.     

List price and sales prices of residential properties during booms and busts

This paper investigates the relationship between the list and sale price of residential properties over the housing cycle. In down or normal markets the list price generally exceeds the sales price; however, when the housing market is strong, homes sell for more than their list price. This observation is not consistent with the assumptions made in the standard model of home sellers’ search behavior. We consider alternative models. In one, sellers set list prices based on their expectations of future changes in sales prices and the arrival rate of buyers; however, demand shocks occur. This model partially explains our data from the Belfast, U.K. housing market, but it fails to predict the list to sales price ratio during a sustained housing boom. We next describe a model where sellers’ endogenously select their search mechanism depending on the strength of the housing market. We find support for the conjecture that sellers switch to an auction-like model during housing booms. There also is evidence that during a downturn in the market, sellers’ list prices are sticky.     

When does delinquency result in neglect? Mortgage distress and property maintenance

Numerous studies have found that foreclosed properties sell at a discount and push down the sale prices of nearby properties, which may be partly driven by poorer maintenance of the foreclosed homes. However, direct evidence of foreclosure-related property neglect has been scarce. This paper uses data on constituent complaints and requests for public services made to the City of Boston to examine the incidence and timing of this type of foreclosure externality. Interior and exterior property conditions appear to suffer most while homes are bank owned, although complaints about reduced maintenance are also common earlier in the foreclosure process.     

Foreclosure,vacancy and crime

This paper examines the impact of residential foreclosures and vacancies on violent and property crime. To overcome confounding factors, a difference-in-difference research design is applied to a unique data set containing geocoded foreclosure and crime data from Pittsburgh, Pennsylvania. Results indicate that while foreclosure alone has no effect on crime, violent crime rates increase by roughly 19% once the foreclosed home becomes vacant – an effect that increases with length of vacancy. We find weak evidence suggesting a potential vacancy effect for property crime that is much lower in magnitude.     

The foreclosure discount: Myth or reality?

Foreclosed properties sell at lower prices than do nearby non-distressed properties. Of particular concern, is whether there is a “stigma” foreclosure discount whereby REO properties sell at lower prices simply because they have been involved in foreclosure proceedings. To the extent that such a discount exists, arbitrage opportunities exist and the associated market failure has significant policy implications. We examine the foreclosure discount from a different perspective than prior researchers by comparing holding period returns earned by purchasers of REOs with those earned by purchasers of similar non-distressed properties. Our results show that the majority of REO purchasers do not earn economically significant excess returns. On average, the implied market discount is less than typical transaction costs. We also find evidence that REO properties and buyers vary systematically from their counterparts in the non-distressed market segment and that REO attribute prices differ from those of non-distressed properties. Overall, our evidence suggests that the market for REOs operates efficiently: lenders are not irrationally dumping REO properties and REO investors are not reaping extraordinary profits.     

Foreclosure externalities: New evidence

Policy makers have used externalities to justify government intervention in the foreclosure process. Using a new dataset that covers 15 of the largest metropolitan statistical areas in the U.S. and a novel identification strategy, this paper provides new evidence on the size and source of these externalities. Our results show that a property in distress affects the value of neighboring properties from the time when the borrower becomes seriously delinquent on the mortgage until well after the bank sells the property to a new owner. Properties with seriously delinquent loans within 0.1 miles are found to decrease transaction prices of non-distressed properties by approximately one percent on average. The spillovers are found to dissipate rapidly with distance and completely disappear one year after the bank sells the property to a new homeowner. Importantly, we find that the size of the externality is sensitive to the condition of foreclosed properties, as bank-owned properties in poor condition lower nearby transaction prices by 2.6% on average while those in good condition marginally raise prices. We argue that the measured price spillovers are physical externalities caused by a lack of property maintenance and not pecuniary externalities that reflect local supply or demand shocks.     

Property Tax and Housing Returns

This paper evaluates the effects of property tax on housing. While land tax and capital gains tax are widely used for curbing hoarding of land and speculation, its effectiveness is inconclusive. The imposition of a capital gains tax will impair the liquidity of property transaction, lower the rate of return on property investment, and reduce revenue from land sales which represents an important tax resource for the communities. This paper shows that a capital gains tax is capitalized into housing prices. Individuals tend to postpone the purchase of houses because of transaction taxes. Using an impulse response function, we show that a transaction tax has a dynamic negative impact on housing returns. While this paper focuses on Hong kong, for the purpose of comparison Singapore and Taiwan are also discussed.     

Managing hedonic housing price indexes: The French experience

Despite their theoretical advantages, hedonic housing price indexes are not so commonly computed by statistical agencies or real estate professionals. Many published indexes still rely on mean or median prices, or favor repeat-sales methods, which require less information about the attributes of the housing units and less econometric expertise on the part of the index compilers, but may be less accurate and robust. In France as in other countries where housing sales have to be recorded in front of a notary, data on transaction prices and characteristics of dwellings are available. Such data have been centralized since 1994, and quarterly hedonic housing price indexes have been computed for more than 10 years. This paper describes the institutional setting of housing transactions in France, and the collaboration between the notaries and the national statistical agency (INSEE). The former are responsible for data collection and regular computation, whereas the latter takes scientific responsibility for the method. The detailed information on the individual properties transacted remains proprietary data, but disaggregated indexes are publicly and freely available. This organization and assignment of roles has proven effective and might be extended to countries with similar institutional settings.     

房产税对房产市场影响的实证研究——上海模式和重庆模式的比较

文章首先运用HP滤波的方式分析了沪渝两地房产税对新房和二手房在价格和成交量上的影响,发现上海房地产市场对房产税的的征收反应更为理性,影响效果更好,但两地区新房和二手房市场的反映都存在差异;此外,利用房价对数模型,发现房产税都能有效的影响两地的房价,但由于影响两地房价的因素有很大的差异,效率并不一样,上海地区房产税每增加1%,房价将下降0.553%,重庆地区房产税每增加1%,房价将下降0.041%。因此国家需区别对待新房和二手房市场,并且因地制宜,推广不同的房产税模式。     

The role of the list price in housing markets: Theory and an econometric model

Houses are routinely sold at prices below, but rarely sold at prices above, their list prices. List prices appear to be price ceilings that preclude the possibility of sales at higher prices. This paper presents a theory of sellers' behaviour that explains why there are list prices in housing markets and why list prices are distinct from sellers' reservation prices. The theory forms the basis of an econometric model that has been estimated using data from the Baltimore, MD, area. The estimated model predicts sale and reservation prices conditional on list prices. The predictions of sale prices are considerably more accurate than those obtained from a standard hedonic price regression. The estimated model also explains why sellers may not be willing to reduce their list prices even after their houses have remained unsold for long periods of time.     

房价变动规律性及调控对策研究

房价的变动既是经济问题,更是政治和社会问题的体现.我国房地产业已经成为拉动国民经济发展的重要支柱产业.金融危机爆发后,房价的大幅波动引起了世界各主要国家的高度关注.本丈结合我国房地产业发展的实际,对房价的变动情况、变动规律性及调控对策问题进行了初步探讨.本文提出影响房价变动的十大要素,对各要素与房价这一变量变动的相关性进行了分析研究,以实现前瞻性的指导房地产业健康发展的目的.     

城市房屋征收中公共权力的配置与控制——以权力为视角评《国有土地上房屋征收与补偿条例》

《国有土地上房屋征收与补偿条例》（以下简称《征收条例》）历经两次公开征求意见在社会公众翘首盼望中得以颁行,在我国法治建设和私权保护方面具有里程碑意义。与《城市房屋拆迁管理条例》（以下简称《拆迁条例》）相比,《征收条例》对城市房屋征收中公共权力的配置模式进行了全面调整,以征收权的行使为中心重新构建了一套权力分立、制约和控...     

Slow but stable(ish) house price growth lies ahead

• ? UK house price growth is running out of steam. And with household incomes squeezed and the affordability of housing stretched, we think a prolonged period of very modest growth lies ahead. But the prospect of a crash is remote.
• ? At 2.6% in Q2 2017, annual house price growth is presently running at a four‐year low. This is a step change down from the recent peak of nearly 10% in mid‐2014 and average growth of 4% over the current economic expansion.
• ? Three developments are likely to lie behind this slowdown. The first is weak growth in households' real income, cutting the ability to save for a deposit or finance a move up the housing ladder. That said, past periods of sluggish income growth have not always been associated with low house price inflation.
• ? The second is the consequence of recent tax hikes imposed on buy‐to‐let investors and second‐home owners, which theory suggests should be capitalised in lower property prices.
• ? The third and perhaps most important reason is the increasing unaffordability of housing to an ever‐widening sub‐set of the population. The ratio of house prices to earnings is almost back at its pre‐crisis record. And the income of the average mortgage borrower is close to £60,000, more than double the average annual wage.
• ? This third factor has implications beyond price growth, suggesting both a permanently lower level of transactions and a further decline in the number of households with mortgages, continuing a trend which began at the beginning of the century.
• ? But set against these headwinds is the cushion provided by record lows for both mortgage rates and mortgage affordability. Overall, house prices are caught between a lack of traditional drivers of accelerating growth, but equally an absence of forces which have typically caused prices to fall. Hence, our expectation of a period of sluggish, but relatively stable, growth.

     

Regional foreclosures and Mexican remittances: Evidence from the housing market crisis

This study investigates the extent to which Mexican workers’ remittances are affected from the recent housing market decline in the United States. Results from a multivariate model reveal that an increase in the national U.S. foreclosure rate has a negative and statistically significant impact on Mexican remittances. At the regional level, foreclosure rates of the South and the West have a significant impact on workers’ remittances in the same negative direction. However, foreclosure rates from the North Central and East Central regions do not appear to have this statistically significant impact. Lastly, in contrast to previous results in the literature, real exchange rate movements and Mexican remittances seem to be insensitive to one another once the housing market is accounted for in the analysis.     

城市住房价格指数编制方法的拓展设计及实证检验

科学监测城市房价走势,在当前环境下尤为重要。为拓展国际通行方法编制国内单一城市房价指数的适用性,引入样本匹配重复交易法构建房价指数,以提高样本容量与可比性。基于上海数据的实证结果表明,相较于传统重复交易法和特征价格法,样本匹配重复交易法能更准确地反映住房价格变动,结果异常波动性更小,噪声影响程度更低,在克服样本代表性误差和变量缺失误差方面效果更显著,对编制国内城市房价指数具有较好应用价值。