A newly released working paper from a pair of Cleveland Fed economists examines the relationship between vacant, tax-delinquent and foreclosed properties and the sales prices of neighboring homes.
The study, which focused on the Cuyahoga County, Ohio, housing market, is among the first research efforts to estimate the impact of vacancy and tax-delinquent properties on area home sales, according to authors Stephan Whitaker and Thomas J. Fitzpatrick IV.
The researchers conclude that although foreclosure, vacancy and tax delinquency differ in meaningful ways, "they may all lower surrounding home values or indicate distress that lowers home values."
"Given the high counts of vacant and delinquent homes, we estimate that these properties are doing more than foreclosures [are] to lower surrounding property values," the paper states.
According to Whitaker and Fitzpatrick's research, an additional vacant or delinquent home within 500 feet of a sale lowers the price of that sale by 0.8% and 0.7%, respectively. An additional foreclosed property can lower the sales price by 1.8%, and a vacant-delinquent home lowers nearby home prices by 3.1%.
A foreclosed home that is vacant, tax delinquent or both has the highest impact on neighboring home prices, lowering the values by 7% to 10%, the paper says.