Foreclosure-Related Vacancy Rates

By Whitaker, Stephan | Economic Commentary (Cleveland), July 26, 2011 | Go to article overview

Foreclosure-Related Vacancy Rates


Whitaker, Stephan, Economic Commentary (Cleveland)


The national foreclosure crisis has caused there to be millions more vacancies in our housing stock than before. Vacant homes lower their community's property values and quality of life. Neighbors and public officials know foreclosed homes sit empty for months, but precise measures of foreclosure-related vacancy are rare. Using data from Cuyahoga County, Ohio, I trace the rise and fall in the vacancy rates of homes during the 18 months following their foreclosure. Ominously, the data suggest that foreclosure may permanently scar some homes. Foreclosed homes still have higher vacancy rates than neighboring houses two to five years after a sheriff's sale.

As the housing market staggers into its fifth year of decline, the issues of foreclosure and vacancy continue to demand our attention. In 2010, 1.85 million consumers nationwide received a new foreclosure notice, compared to between 600,000 and 800,000 in the "normal" times of a decade earlier.

Almost all foreclosed homes are at least temporarily vacant; as long as they remain so, they impact the home values and quality of life in their neighborhoods. What if the vacancy associated with foreclosure lingers on long after the foreclosure? Could the rise in foreclosures translate into both a short- and a long-term increase in vacancy?

Using a unique data set covering Cuyahoga County, Ohio, I explore whether foreclosed homes are reoccupied at rates similar to those of other recently sold homes. The data reveal that foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure.

The distribution of foreclosures is heavily weighted toward high-poverty areas, and homes in these areas are more likely to be vacant long after they are sold. However, even compared to homes in census tracts with similar poverty levels, foreclosed homes show higher vacancy rates than others years after the auction.

The Impact of Vacancy

Foreclosure and the vacancy it causes are a concern for policymakers because a foreclosure's impact extends to hundreds of people in the neighboring community. A foreclosure adds one more home to the supply on the market and so depresses the prices of all homes sold in the area. This leads to smaller gains or larger losses for people who must sell in the current market and devalues the largest asset most households own- their house. This lower value limits homeowners' ability to extract equity for expenses such as home improvements, starting a business, college tuition, or retirement. Owners of depreciated homes may constrain their spending to try to make up for the lost wealth, and this can act as a drag on economic growth.

A vacant home can also lower property values, even if it is not for sale. Vacant homes are often part of a "shadow inventory" because the owners intend to put them on the market when demand recovers. Every month, some of these owners will decide that the costs of holding an empty house outweigh the benefits of waiting. In locations with a lot of shadow inventory in addition to the active inventory, there is downward pressure on home prices.

Moreover, the exterior of a vacant home is usually less likely to be well-maintained than an occupied one. This detracts from the vitality of the neighborhood and the prices buyers are willing to pay for nearby homes. In high-crime areas, unoccupied homes are often broken into, stripped of valuable metals, and vandalized. In some cases, criminals move into the homes and run illegal operations from them. As foreclosures have increased in recent years, so have the studies that estimate their economic impact. It is not surprising that economists have been able to detect a distinct difference in prices for homes near a recently foreclosed property. John Harding, Eric Rosenblatt, and Vincent Yao used data from seven metro areas to estimate the impact of a foreclosure on the sale prices of nearby homes. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Foreclosure-Related Vacancy Rates
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.