Abstract:
The American dream of home ownership has turned into an American nightmare for many
regions of the country. As housing prices and sales took a downturn beginning mid-2006,
many Americans owed more than their homes were worth. This event marked the
beginning of a wave of foreclosures in numbers never seen before that has continued
through 2009. A handful of studies address the potential risk foreclosures cause to
neighborhood and community stability. One such effect foreclosures have on the
community can be attributed to declining neighborhood property values. Through a
regression method applied to three housing models that controls for location, property
and subdivision characteristics, this thesis quantifies the price-depressing effect of
residential foreclosures in Fairfax County, Virginia for single-family homes, townhomes,
and condominiums. Final results of the regression analysis estimate that the effect of a
1% increase in residential foreclosure in a subdivision decreases property values by
6.26% among condominiums, 2.02% among single-family homes, and 1.19% among
townhomes. Across Fairfax County, the estimated total fiscal impact of foreclosures on
residential property values is $2.3 billion, resulting in an estimated property tax revenue
loss of $22 million.
