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Foreclosures and House Prices

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  • Michele Loberto

    (Bank of Italy)

Abstract

This paper studies the impact of foreclosures on house prices in Italy using a large dataset of online listings provided by Immobiliare.it, the most popular online portal for real estate services in Italy. We estimate that the foreclosure discount is considerable, and this would suggest a high degree of market segmentation and limited spillovers from foreclosures to the market for non-foreclosed homes. However, by exploiting the exogeneity of the market entry of foreclosures, we find that new foreclosures increase home sellers’ propensity to adjust their list price. Moreover, following the methodology in Campbell et al. (Am Econ Rev 101(5):2108–2131, 2011), we show that foreclosure listings have a significant negative impact on the prices of non-foreclosed nearby homes. Our evidence is quantitatively consistent with the recent literature on the impact of foreclosures on the US housing market.

Suggested Citation

  • Michele Loberto, 2023. "Foreclosures and House Prices," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(1), pages 397-424, March.
    • Handle: RePEc:spr:italej:v:9:y:2023:i:1:d:10.1007_s40797-021-00166-z
    DOI: 10.1007/s40797-021-00166-z
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    1. Adam M Guren & Timothy J McQuade, 2020. "How Do Foreclosures Exacerbate Housing Downturns?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(3), pages 1331-1364.
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    12. Federica Ciocchetta & Wanda Cornacchia & Roberto Felici & Michele Loberto, 2016. "Assessing financial stability risks from the real estate market in Italy," Questioni di Economia e Finanza (Occasional Papers) 323, Bank of Italy, Economic Research and International Relations Area.
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    More about this item

    Keywords

    House prices; Foreclosures; Neighborhood effects;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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