Research review: spillover effects of foreclosures on communities

A house is not just a physical shelter, but also a stitch in the fabric of society, integrating its residents into the life of the larger community. That is why foreclosures may hurt neighborhoods as much as they hurt those who lose their homes. Foreclosures may negatively impact a community when they depress the values of nearby properties, reduce the property tax base, increase blight and crime, and disrupt local social ties. We summarize some of the research that examines foreclosures’ effects on the prices of nearby properties.