Journal of Geographical Systems

, 11:317

The neighborhood effects of foreclosure

Original Article


Neighborhood quality is an important attribute of housing yet its value is rarely known to researchers. We argue that changes in nearby foreclosures reveal changes in neighborhood quality. Thus estimates of the hedonic price of nearby foreclosures provide a glimpse of values that people hold for local neighborhood quality. The empirical models include controls for both spatial dependence in housing prices and in the errors. The estimates indicate that nearby foreclosures produce externalities that are capitalized into home prices—an additional foreclosure within 250 feet of a sale negatively impacts selling price by approximately $1,666, ceteris paribus.


Hedonic model Foreclosures Spatial dependence Local public goods Property values 

JEL Classification

R21 R28 H41 

Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  1. 1.Economics ProgramUniversity of Texas at DallasRichardsonUSA

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