Foreclosure Spillovers within Broad Neighborhoods

43 Pages Posted: 31 May 2021 Last revised: 18 Nov 2021

See all articles by Weiran Huang

Weiran Huang

Department of Finance City of New York

Ashlyn Aiko Nelson

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Stephen L. Ross

University of Connecticut - Department of Economics

Date Written: May 2021

Abstract

Most evidence on foreclosure spillovers identifies localized effects that are modest in magnitude, but these effects could multiply to larger aggregate effects across broad neighborhoods. We test this proposition developing a proxy for the fraction of mortgages in negative equity during the foreclosure crisis and estimating a difference-in-differences model for foreclosure. This proxy exploits the timing of foreclosures in each tract, and this within tract variation is not predicted by mortgage attributes, housing attributes or sales prices. Our estimates suggest that 61 percent of the increase in across tract dispersion in foreclosure filings can be explained by these spillover effects.

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Suggested Citation

Huang, Weiran and Nelson, Ashlyn Aiko and Ross, Stephen L., Foreclosure Spillovers within Broad Neighborhoods (May 2021). NBER Working Paper No. w28851, Available at SSRN: https://ssrn.com/abstract=3856831 or http://dx.doi.org/10.2139/ssrn.3856831

Weiran Huang (Contact Author)

Department of Finance City of New York ( email )

NY

Ashlyn Aiko Nelson

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Stephen L. Ross

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

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