Econintersect: Professors from Tulane University and Georgia State University have studied the national distribution of foreclosures in an attempt to quantify the impact on taxes and property values. In their published paper in Land Lines they completed analysis only for the state of Georgia.
The distribution of foreclosures shows pronounced clustering creating a very large number of potential controlled experiments using data from zip code clusters with very high foreclosure rates with adjacent clusters with lower, very low or zero foreclosures.
The paper shows a clear trend for nationwide data for a scatter plot of house prices vs. foreclosure counts (not shown here). However the scatter evident in the plot is considerable suggesting that more localization of analysis might produce different functional relationships from one local region to another. To this end the authors chose to focus on the data for the state of Georgia, the home state for two of the three.
Unfortunately they did not include any scatter plots for the Georgia data to compare with the national data.
The study conclusions find there are significant negative affects of forelosure:
How have foreclosures driven by the Great Recession affected property values and property tax revenues of local governments? Our results suggest that foreclosures have had a significant negative impact on property values, and, through this channel, a similar effect on property tax revenues, at least in the state of Georgia. Our results also suggest additional effects on levies and revenues after controlling for changes in the tax base. Further work is required to see whether these results extend to other states.
Click on the following image to access the full article which contains extensive graphics:
- How Do Foreclosures Affect Property Values and Property Taxes? (James Alm, Robert D. Buschman, and David L. Sjoquist, Land Lines, January 2014 – pdf with graphics)
- How Do Foreclosures Affect Property Values and Property Taxes? (James Alm, Robert D. Buschman, and David L. Sjoquist, Lincoln Institute of Land Policy, January 2014 – html without graphics)