Working Paper: NBER ID: w28851
Authors: Weiran Huang; Ashlyn Nelson; Stephen Ross
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.
Keywords: foreclosure; spillover effects; neighborhood dynamics; negative equity
JEL Codes: G21; R23; R32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increases in negative equity (G32) | likelihood of receiving foreclosure notices (G21) |
| one standard deviation increase in the number of units that have received foreclosure notices (R31) | likelihood of a mortgage in the tract entering foreclosure (R21) |
| negative equity (G32) | subsequent foreclosure rates (G21) |
| prior foreclosures (G33) | subsequent foreclosure rates (G21) |