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Foreclosures, House Prices, and the Real Economy

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Listed:
  • Atif Mian
  • Amir Sufi
  • Francesco Trebbi

Abstract

States without a judicial requirement for foreclosures are twice as likely to foreclose on delinquent homeowners. Comparing zip codes close to state borders with differing foreclosure laws, we show that foreclosure propensity and housing inventory jump discretely as one enters non-judicial states. There is no jump in other homeowner attributes such as credit scores, income, or education levels. The increase in foreclosure rates in non-judicial states persists for at least five years. Using the judicial / non-judicial law as an instrument for foreclosures, we show that foreclosures lead to a large decline in house prices, residential investment, and consumer demand.

Suggested Citation

  • Atif Mian & Amir Sufi & Francesco Trebbi, 2011. "Foreclosures, House Prices, and the Real Economy," NBER Working Papers 16685, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16685
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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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