Foreclosure's Price-Depressing Spillover Effects on Local Properties: A Literature Review Foreclosure's Price-Depressing Spillover Effects 
        on Local Properties: A Literature Review

By Kai-yan Lee

The costs of foreclosure often spill over from foreclosed properties to other nearby properties. This short paper reviews some of the research on foreclosure's price-depressing impact on sales of nearby properties, only one of several forms of spillover effects. The studies reviewed here focus on various cities, use different datasets and methodologies, employ different assumptions, and cover different time periods. Their conclusions about foreclosure effects range from reducing nearby properties' sales value by as little as 0.9% to as much as 8.7%. Research also shows that negative spillover effects tend to diminish with distance and time, as does the marginal impact of each additional foreclosure. This paper also presents two studies with rough estimates on New England communities' possible losses from foreclosures' spillover effects on nearby property values.

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