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Home Foreclosures as Early Warning Indicator of Neighborhood Decline

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  • Sonya Williams
  • George Galster
  • Nandita Verma

Abstract

Problem, research strategy, and findings: Ideally, planners would intervene in neighborhood processes before substantial forces of decline have gained momentum. Unfortunately, currently there is no guidance about which neighborhood indicators forecast future neighborhood changes. This study seeks a neighborhood early warning indicator that is readily available, frequently updated, and that predicts with substantial foresight and accuracy future changes in key aspects of neighborhood market processes and quality of life. We search over a range of neighborhood indicators for one or more that clearly lead others in a temporal sense, instead of lagging behind them. We employ Granger causality tests with indicators related to public safety, housing market, and economic activity that are based on data from Chicago neighborhoods between 1998 and 2009. Our key finding is that only one indicator analyzed, completed home foreclosures, systematically precedes other neighborhood indicators but does not systematically follow after them. All other indicators are enmeshed in complicated, often mutually causal temporal patterns, which render them inappropriate for forecasting. We conclude that completed home foreclosures is an appropriate early warning indicator of neighborhood decline in several dimensions. Takeaway for practice: Planners interested in identifying imminently emerging problems in their constituents' neighborhoods should regularly acquire and map data on home foreclosures as soon as they become available, and then undertake compensatory actions as quickly as feasible.

Suggested Citation

  • Sonya Williams & George Galster & Nandita Verma, 2013. "Home Foreclosures as Early Warning Indicator of Neighborhood Decline," Journal of the American Planning Association, Taylor & Francis Journals, vol. 79(3), pages 201-210, July.
    • Handle: RePEc:taf:rjpaxx:v:79:y:2013:i:3:p:201-210
    DOI: 10.1080/01944363.2013.888306
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    References listed on IDEAS

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    1. Rothenberg, Jerome & Galster, George C. & Butler, Richard V. & Pitkin, John R., 1991. "The Maze of Urban Housing Markets," University of Chicago Press Economics Books, University of Chicago Press, number 9780226729510, September.
    2. Elliot Anenberg & Edward Kung, 2012. "Estimates of the size and source of price declines due to nearby foreclosures: evidence from San Francisco," Finance and Economics Discussion Series 2012-84, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Jan Voltaire Vergara & Maria Y Rodriguez & Jonathan Phillips & Ehren Dohler & Melissa L Villodas & Amy Blank Wilson & Kenneth Joseph, 2024. "An evaluation framework for predictive models of neighbourhood change with applications to predicting residential sales in Buffalo, NY," Urban Studies, Urban Studies Journal Limited, vol. 61(5), pages 838-858, April.

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