The Determinants of Foreclosed Property Values: Evidence from Inner-City Cleveland

This paper examines the overall magnitude and determinants of the value of foreclosed homes. A hedonic analysis of residential sales from Cuyahoga County, Ohio is employed to estimate how property and location-specific characteristics influence the foreclosure discount. Results indicate that the discount is substantial and subject to wide variations. The discount depends on a home’s age, size, and condition, as well as numerous neighborhood characteristics. The duration of vacancy and number of surrounding foreclosures also impact the discount level. The results from this analysis inform policymakers on how foreclosure diminishes community property values and have practical implications to lenders and investors.