Foreclosures, house prices, and the real economy
By: Atif Mian, Amir Sufi, Francesco Trebbi
Contributors: Trebbi, Francesco; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16685; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16685.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "A central idea in macroeconomic theory is that negative price effects from the leverage-induced forced sale of durable goods can amplify negative shocks and reduce economic activity.  We examine this idea by estimating the effect of U.S.  foreclosures in 2008 and 2009 on house prices, residential investment, and durable consumption.  We show that states that require judicial process for a foreclosure sale have significantly lower rates of foreclosures relative to states that have no such requirement.  Using state laws requiring a judicial foreclosure as an instrument for actual foreclosures, as well as a regression discontinuity design around state borders with differing foreclosure laws, we show that foreclosures have a large negative impact on house prices.  Foreclosures also lead to a significant decline in residential investment and durable consumption.  The magnitudes of the effects are large, suggesting that foreclosures have been an important factor in weak house price, residential investment, and durable consumption patterns during and after the Great Recession of 2007 to 2009"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 4/19/2011.

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