For foreclosure data, this study focuses on the beginning stage of the foreclosure process. Thus, the filing of the foreclosure notices, the term "Foreclosure Start” (the pre- foreclosure stage at 90 days late in mortgage payments) or simply “Foreclosure” is used in this study. The information on foreclosure filings are obtained from the public records of the Maricopa County Recorder's Office. However, the format of the database cannot
28601 6155 5949 1465 2214 6730 256 538 0 5000 10000 15000 20000 25000 30000 35000 Single Family Home Sales in 2005 Single Family Home Sales in 2008 Condo Sales in 2005 Condo Sales in 2008 H o u si n g U n it s S o ld Distressed Sales Typical Sales
be easily transformed for academic analysis. Even if the databases include detailed addresses or parcel ID numbers, many of those datasets only have legal descriptions of the properties, which are very difficult to code into geographic information or merge with other datasets. Thus, foreclosure data was purchased in an excel format from the private database vendor “Foreclosure Radar.”10
Figure 4.5 presents the comparison of foreclosure data during different housing cycles. Foreclosure filings increased tremendously in 2007-2008 (housing busts), compared to 2004-2005 (housing booms). The foreclosure filings for single family homes increased from 7,424 in 2004-2005 to 31,778 in 2007-2008, which is about a 428% increase. The foreclosure filings of condos increased from 803 in 2004-2005 to 2,992 in 2007-2008, which is about a 372% increase.
Figure on page 91 (Figure 4.6) shows the density of foreclosure filings for single family homes during 2004-05 (left, red dots) and 2007-08 (right, red dots) and home sale transactions during 2005 (left, green dots) and 2008 (right, green dots). Figure on page 92 (Figure 4.7) shows the number of foreclosure filings for condos during 2004-05 (left, purple dots) and 2007-08 (right, purple dots) and condo sale transactions during 2005 (left, blue dots) and 2008 (right, blue dots) in the Phoenix area.
10
ForeclosureRadar.com, based in California, provides reliable information on properties in every phase of the foreclosure process by membership. The information covers foreclosures in California, Arizona, Nevada, Oregon, and Washington. The original data comes from the county assessor or records office.
Figure 4.5. Units of Foreclosure Starts in Phoenix during 2004 - 2005 and 2007 - 2008. 7424 803 31778 2992 0 5000 10000 15000 20000 25000 30000 35000
Single Family Home Foreclosures Condo Foreclosures
F o re cl o su re U n it s
SFH Foreclosures during 2004‐2005 SFH Foreclosures during 2007‐2008 Condo Foreclosures during 2004‐2005 Condo Foreclosures during 2007‐2008
Single Family Home Sales in 2005 Single Family Home Foreclosures in 2004
Figure 4.6. Single Family Home Sales in 2005 and 2008 and Single Family Home Foreclosures
2004‐2005
Single Family Home Sales in 2008 Single Family Home Foreclosures in
Figure 4.6. Single Family Home Sales in 2005 and 2008 and Single Family Home Foreclosures in 2004-20 91
Foreclosures in 2007‐2008
Condo Sales in 2005
Condo Foreclosures in 2004‐2005
Figure 4.7. Condo Sales in 2005 and 2008 and Condo Foreclosure
Condo Sales in 2008
Condo Foreclosures in 2007‐2008
One of the key points of this study is how to measure the foreclosure impact on nearby home prices. Recently, Lin, Rosenblatt, and Yao (2009) found that the spillover effects of foreclosures were significant within 0.6 miles and 5 years of foreclosure. The price-depressing spillover effect was the most severe (-8.7%) on adjacent properties within 2 years of foreclosure, and it diminished to as low as -1.7% at a distance of about 0.6 miles (0.9km). Schuetz, Been, and Ellen (2008) presented a study of residential (single and multi-family) property sales and foreclosure notices in New York City between 2000 and 2005. The authors identified properties with foreclosure notices and nearby non-distressed sales in both physical space (within 250 feet; 250-500 feet; 500- 1000 feet) and time (less than 18 months and greater than 18 months).
Their findings suggest the importance of preventing early foreclosures since foreclosures tend to have bigger price-depressing effects on nearby properties. Based on previous research, this study constructed foreclosure data sets for two prior years before the home sales transactions to address an appropriate timeline for foreclosure impact. In doing so, this study assumes that the number of foreclosures within a specific distance have effects on nearby sale prices in two prior years.11 Thus, the foreclosure filing as the
first stage of the foreclosure process is used here as a proxy for proceeding to actual foreclosure sales and REOs (real estate owned properties by lenders).
However, the difficulty in accessing accurate, comprehensive, and timely data on all foreclosed properties, REOs (real estate owned properties by lenders), and vacant
11
If there are repeated foreclosures in the same locations around a single family home sale or condo sale in two prior years before the transaction date, GIS software counts only one foreclosure event in the same year, avoiding duplicated counts of foreclosure. The measured foreclosure is the first foreclosure event among duplicated ones in foreclosure time lines.
properties still remains in this study. These troubled properties with different time lines may cause issues of spatial dependency and omitted variables. Furthermore, property condition in these data sets was left out due to data limitation, even though it is an important determinant of property value measurement. Thus, the success of future research would be highly dependent on the quality of the local data, and would possibly introduce further timing issues. Given the appropriate data, it could provide interesting insights into the typical sequencing of foreclosure problems.
4.3 Research Methodologies