The Spatial-Temporal Impact of Residential Foreclosures on Single-Family Residential Property Values

Abstract

As the home mortgage foreclosure crisis continues to spread, few households and geographic locations in the United States remain unaffected. This has led to a great deal of research on the causes and the impacts of the foreclosure crisis. This article focuses on the latter and specifically addresses the impact that residential foreclosures have on nearby single-family residential properties. Previous research has concluded that there is a negative impact. Although the hypothesis for this article has not changed, the authors offer a change in methodology. The study analyzes foreclosures' impact based upon face blocks, not straight-line distances, and it also incorporates time and the use of spatial statistics. Findings from this study show a negative relationship between the length of time a property has been foreclosed and its effect on neighboring property values. The first negative impact is seen after one year, and sheriff sales have a greater negative impact than preforeclosures. Therefore, policy responses need to be as swift as possible to prevent any negative impact on neighboring property values and all the while must attempt to prevent properties from going to auction.