Do Home Foreclosures Affect Some Neighborhoods More than Others?

According to a December 2010 report from the United States Bureau of Labor Statistics’ Monthly Labor Review report, the U.S. housing bubble peaked in 2006 and burst in 2008. Residential-construction-employment fell to levels lower than those in 1993 and foreclosure signs quickly became a common sight in neighborhoods across the country. But were some neighborhoods affected more than others? Why? This is what authors Keith Ihlanfeldt and Tom Mayock explored in their article “The Variance in Foreclosure Spillovers across Neighborhood Types” from Public Finance Review.

The abstract:

The estimation of foreclosure spillover effects has been the subject of a number of studies following the most recent housing market crash. An important issue largely overlooked by these studies is the extent to which these spillovers vary across neighborhoods. In this article, we use data from the South Florida metropolitan area to study the variance in these foreclosure spillovers across neighborhoods with different income levels and racial concentrations. We find that the largest foreclosure spillovers occur in higher-income neighborhoods. In low-income, minority neighborhoods, we find no evidence of spillover effects. The results have important implications for local governments.

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