The Effect Of Foreclosures On Nearby Housing Prices: Supply Or Disamenity?
Several studies have measured negative price effects of foreclosed residential properties on nearby property sales. However, these studies do not address which mechanism is responsible for these effects. The author measures separate effects for different types of foreclosed properties and use these estimates to decompose the effects of foreclosures on nearby home prices into a component that is due to additional available housing supply and a component that is due to disamenity stemming from deferred maintenance or vacancy. The author estimates that each extra unit of supply decreases prices within 250 feet by about 1.6% in low-vacancy-rate census tracts while the disamenity stemming from a foreclosed property is near zero.