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The impact of foreclosures on the housing market

Author

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  • Daniel Hartley

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.

Suggested Citation

  • Daniel Hartley, 2010. "The impact of foreclosures on the housing market," Economic Commentary, Federal Reserve Bank of Cleveland, issue Oct.
    • Handle: RePEc:fip:fedcec:y:2010:i:oct27:n:2010-15
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    File URL: https://www.clevelandfed.org/publications/economic-commentary/2010/ec-201015-the-impact-of-foreclosures-on-the-housing-market
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    Cited by:

    1. Youngme Seo & Cynthia Holmes & Mark (Seung Hwan) Lee, 2023. "Examining the Cash-Only Price Discount and the Driving Forces of Cash-Only Transactions in the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 67(3), pages 480-516, October.

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