Federal Reserve Bank of Cleveland | Foreclosures May Permanently Scar Homes

Economic Commentary

Foreclosure-Related Vacancy Rates

Stephan Whitaker

The national foreclosure crisis has caused there to be millions more vacancies in our housing stock than before. Vacant homes lower their community’s property values and quality of life. Neighbors and public officials know foreclosed homes sit empty for months, but precise measures of foreclosure-related vacancy are rare. Using data from Cuyahoga County, Ohio, I trace the rise and fall in the vacancy rates of homes during the 18 months following their foreclosure. Ominously, the data suggest that foreclosure may permanently scar some homes. Foreclosed homes still have higher vacancy rates than neighboring houses two to five years after a sheriff’s sale.

As the housing market staggers into its fifth year of decline, the issues of foreclosure and vacancy continue to demand our attention. In 2010, 1.85 million consumers nationwide received a new foreclosure notice, compared to between 600,000 and 800,000 in the “normal” times of a decade earlier.

Almost all foreclosed homes are at least temporarily vacant; as long as they remain so, they impact the home values and quality of life in their neighborhoods. What if the vacancy associated with foreclosure lingers on long after the foreclosure? Could the rise in foreclosures translate into both a short- and a long-term increase in vacancy?

Using a unique data set covering Cuyahoga County, Ohio, I explore whether foreclosed homes are reoccupied at rates similar to those of other recently sold homes. The data reveal that foreclosed homes go through more than a year of very high vacancy rates following the auction and are substantially more likely to be vacant up to 60 months after the foreclosure.

The distribution of foreclosures is heavily weighted toward high-poverty areas, and homes in these areas are more likely to be vacant long after they are sold. However, even compared to homes in census tracts with similar poverty levels, foreclosed homes show higher vacancy rates than others years after the auction.

The Impact of Vacancy

Foreclosure and the vacancy it causes are a concern for policymakers because a foreclosure’s impact extends to hundreds of people in the neighboring community. A foreclosure adds one more home to the supply on the market and so depresses the prices of all homes sold in the area. This leads to smaller gains or larger losses for people who must sell in the current market and devalues the largest asset most households own—their house. This lower value limits homeowners’ ability to extract equity for expenses such as home improvements, starting a business, college tuition, or retirement. Owners of depreciated homes may constrain their spending to try to make up for the lost wealth, and this can act as a drag on economic growth.

A vacant home can also lower property values, even if it is not for sale. Vacant homes are often part of a “shadow inventory” because the owners intend to put them on the market when demand recovers. Every month, some of these owners will decide that the costs of holding an empty house outweigh the benefits of waiting. In locations with a lot of shadow inventory in addition to the active inventory, there is downward pressure on home prices.

Moreover, the exterior of a vacant home is usually less likely to be well-maintained than an occupied one. This detracts from the vitality of the neighborhood and the prices buyers are willing to pay for nearby homes. In high-crime areas, unoccupied homes are often broken into, stripped of valuable metals, and vandalized. In some cases, criminals move into the homes and run illegal operations from them.

As foreclosures have increased in recent years, so have the studies that estimate their economic impact. It is not surprising that economists have been able to detect a distinct difference in prices for homes near a recently foreclosed property. John Harding, Eric Rosenblatt, and Vincent Yao used data from seven metro areas to estimate the impact of a foreclosure on the sale prices of nearby homes. Their results suggest that a distressed property within 300 feet of a home sale will lower the sale price by 1 percent. John Campbell, Stefano Giglio, and Parag Pathak report a similar finding in their study, which analyzes two decades of sales records from Massachusetts. They observe that a foreclosure within 264 feet reduced the sale price of a house by 1 percent. These two studies build on a list of similar published findings.

In articles on foreclosure, authors usually note that foreclosures lead to vacancies, which can depress sales prices through the supply and disamenity channels discussed above. A study by the Federal Reserve Bank of Cleveland’s Dan Hartley estimates the strength of the two channels separately. He finds that foreclosures in high-vacancy neighborhoods depressed prices by 2 percent via a disamenity effect, whereas foreclosures in low-vacancy neighborhoods depressed prices by 1.6 percent via a supply effect.

Parcel-level foreclosure data are widely available because the process must be recorded in court and property records. Data on the vacancy of individual homes are more difficult to obtain, so only one study so far has estimated the impact of vacant homes on nearby property values. Brian Mikelbank used data, collected by the City of Columbus, which identified vacant and abandoned homes along with foreclosures. He estimated that a vacant home reduced the sale price of nearby homes by 3.6 percent in the year following the city’s survey. Controlling for vacancies reduced the estimated impact of the foreclosures, reflecting the strong relationship between the two. Anecdotal information and aggregate figures suggest that foreclosures cause additional vacancies, but the relationship needs further study using data on individual properties.

A Study of One Ohio County

To study whether foreclosure increases the length of time homes stay vacant, a set of data have to be constructed. I focused on Cuyahoga County, a populous counties hit hard by the foreclosure crisis. I used county sales records from 2006 to 2010, and for vacancy data, I used the U.S. Postal Service’s address database. Homes are recorded as vacant in the USPS database if they have been vacant for at least 90 days. Actual vacancy rates are likely higher because there are many short-term vacancies that are not captured in this data.

The vacancy observations used in this analysis were all made in 2010. Figures that represent how many homes are vacant four or five years after a sale are calculated by taking homes that were sold in 2006 and observing whether they were vacant in 2010. Likewise, the vacancy rates calculated for the months close to a sale are based on sales in 2009 and 2010. The housing units are included in every month-difference group where it is possible to observe both sales and vacancies. Altogether, the calculations involve 85,000 properties and 130,000 sales transactions. I considered a sale a foreclosure if the transaction is recorded as a sheriff’s sale.1

As to the question of whether foreclosed homes are more likely to be vacant after the sale, the simplest answer is yes. Six to nine months before the sale, the occupancy rates of both types of homes are essentially the same (figure 1). By the date of the sale, the homes in foreclosure are already more likely to be in an extended period of vacancy. After the sale, there is a sharp contrast: Homes sold through ordinary transactions are occupied by their new owners within a few months. Vacancies among the foreclosed homes increase during the same period.

Check out the rest with charts and data points here…



40 Responses to “Federal Reserve Bank of Cleveland | Foreclosures May Permanently Scar Homes”
  1. TXTriumph says:

    I grew up in Cuyahoga County Ohio. In tx today with the 24th day of plus 100 degrees i miss the short but blissful summers there.

    OHIO you suffer with the Country. All of the statistics, the charts, the issues are not pointing to the FACT of the FRAUDCLOSURE , the deception of the people with crap like hope hamp mha and yes the dodd stuff.

    MONEY is the ART of WAR and the GAME doesnt play with a soul – only to see who wins the game.

    GOD BLESS ohio and my poor Brother who is a Bank Exec there.

  2. lvent says:

    Don’t pay for WALL STREETS crimes with your homes…They set us up to fail by bundling too many bad loans with a few good loans..It was intentional, massive and pernicious….The proof is in the Credit Default Swap insurance they all purchased against your home….Even the investors bought Credit Default Swap insurance against the risk they took…They are gaining the system once again by fraudclosing or forcing you to rent your home..They made hundreds of trillions of dollars off of the derivatives they created off of the loans they made both good and bad…They knew they were creating a bubble and they knew it would burst…and they put all of their ill gotten gains in overseas bankster accounts and socialized the debt the created onto all of us..They set MAINSTREET up to fail and robbed us blind. It was the biggest GLOBAL PONZI SCHEME SWINDLE AND HEIST..Your home is paid for free and clear because of what they did. See the movie INSIDE JOB….ALL OF THE DEVILS ARE HERE, IN PLAIN SIGHT.

    • Would appreciate everyone’s comments and constructive suggestion on what is below this request.

      Nugatory Declaration Certifying Cancellation of All Mortgages and Assignments

      The hereinafter described Property owned by _______________ is hereby Declared and Certified by _________ to be free and clear of any and all Mortgages and Assignments purporting to claim an interest or lien in the Property inasmuch as all such Instruments hereinafter denominated as Recorded, either as mortgages or promissory notes thereto underlying and or subsequent assignments, were obtained or promulgated in violation of Law and contrary to Law and constituting a nullity as such was obtained either by Fraud or bad faith and unclean hands in the lending process that is unavailing on instance of forgeries and promissory estoppel and constructive fraud and fraud factum and unfair business practices conducted by incorporated entities and agents thereof, making false inducements in the course and practice and policy designed to receive unjust enrichment without risk of consideration or value in the null and void transactions that are ultra vires, null and void, ab initio.
      Each of the Entities herein named hereinafter have been contacted in writing and delivered a copy of this Document at least 30 days before recording and each such Entity has failed to rebut and or answer within the 30 days prescribed and has remained silent during the 30 days preceding this recording and each identified Entity has by such silence granted tacit consent and waiver to this Nugatory Declaration, that the facts stated herein are true and incontravertable as to the commission of Fraud, Consumer Fraud, Constructive Fraud, False Inducement, Predatory Lending, Unclean Hands, Unjust Enrichment, Unconscionable Conduct, Estoppel, Nullity, Failure to Disclose, Violations of Truth in Lending, Mail Fraud, Violations of Respa, Destruction of the Original Note and Fatal Variance in Assignments, Forgery, Misrepresentation, Trustee Malfeasance and Gross Negligence, Counterfeiting Securities and slander of title and conflict of interest and prepayment, failure to record release in satisfaction, unfair trade, bait and switch, coercion. Entities are as shown in Public Record Documents as Recorded with these numbers:

      Legal Description:

      Be it hereby known to all the World that _____________ is the sole owner and that such owner holds free and clear title against all other claims for interest in the Property as there is no secured interest in the property whatsoever.
      Appeared before me ________ a duly commissioned Notary Public for the State of _____ and County of _____ on this date of: _______, the person and individual personally known to me to be or otherwise properly identified, the same to be duly sworn upon this Oath, to Declare subject to the penalties for perjury, that the above and foregoing statements and or representations are true as a matter of personal knowledge and reason to believe that all such statements and or representations are true to the best of his knowledge.

      Michael @ The “MIXED WAR” Room and The Trials of Life

      • lvent says:

        Beautiful!!!!! This is BRILLIANT!!!! How many millions of these cancellations of their bogus contract do you think we need? This could get those postal workers back their jobs when WE THE PEOPLE mail these en masse to the White House!!!!!!! We The People are legion, Expect us…..!!!!

      • lvent says:

        If WE THE PEOPLE get behind this, and WE ALL DO THIS, they are DONE, THEY ARE TOAST LET’S STICK THIS FORK IN THEM!!!!!

      • lvent says:

        Every American Citizen must watch INSIDE JOB to understand exactly who was involved in this and how the robbed us.. My husband and my son watched it with me the other night and now they are as mad as I am.

      • lvent says:

        We have PROOF of all of their FRAUD and it is undeniable………I would still like to SEE with my own two eyes, exactly how many SHIT LOANS are floating around in that BOGUS HSBC GLOBAL TRUST…………NOW THERE IS THE PROOF OF HOW THEY SET US ALL UP TO FAIL..IT WAS THE BUNDLING OF A FEW GOOD LOANS WITH TOO MANY BAD AND THAT IS HOW THEY PUT _ALL_ OF US ON THE MORTGAGE FRAUD TITANIC……

      • lvent says:

        We The People will make them an offer they can’t refuse. If they won’t rescind their fraud….We The People will launch a massive NATIONWIDE PROPERTY TAX REVOLT……If the revived Roman Empire can’t collect a few grand a homeowner they can’t keep their evil empire going. They are trying to screw the teachers and the cops and the firemen anyway. We The People can make a stand now or never……

      • Thanks I vent, but this does not work if others do not do this and help perfect this document and spread the word – so keep promoting and lets get this snowball rolling ….

      • lvent says:

        Can the attorneys at this website perfect this to what you think this needs to be?? I really believe you are on the right track……I know we need to add Hold Harmless so they can not come back on us at at later date…An attorney told me that…

      • I noticed that you referred to this as a “cancellation”, but what I have read about fraud in a notary book recently and otherwise when there is misrepresentations and any of the other evils involved then the loan is as though it never existed and a court in a decision used the words “nugatory and unavailing” which I use in this document instead of recission or repudiation as others have used – hence it is not a cancellation as you do not cancel something that does not exist, but treat as as never existing, by use of proper nomenclature to get the point across with explicit certainty as nunc pro tunc ab initio and null and void and not something to be treated as operative until nullified and invalidated.

      • lvent says:

        I just read your comment and you seem to have pinned this thing down…You are exactly right, the loan never existed……….and we have proof so that should mean case closed…..

      • Bobbi Swann says:

        A Trillions….- Matt Weidner is an attorney here in Florida who fights endlessly for the homeowner. Since you have the document in form why don’t you post it on his (new) site. He is now connecting with attorneys all across the nation and it would be a great way to get your document out there for edit. Since the laws vary from state to state, being judicial and non-judicial there may be a need to alter it for those types of foreclosure actitity. Actually, I agree with the others and Ivent that this is a brilliant idea.

    • Hey I VENT, do you have any explanation by what is meant by “hold harmless” as I am not sure what this statement is about and how it applies to this document?

      • lvent says:

        From what I understand that means they cannot come back at a later date and say you owe them money………..I think it is an extra protection…..I will look up the legal terminology….

      • lvent says:

        hold harmless by legal definition means a apromise to pay any costs or claims which may result from an agreement. Quite often this is part of a settlement agreement in which one party is concerned that there might be unknown lawsuits or claims stemming from the situation so the other party agrees to cover them….

        It was just a suggestion… We know we can’t trust these people so we better cover our asses I mean assets..

      • lvent says:

        Say some Saudi investor comes along in couple of years and says I have a right to collect money from you….Now if we are asking for full loan recission this may not even be needed. As I said, am not an attorney….

      • lvent says:

        A Nugatory Declaration is a declaration of war…….So we only need one of these to be sent to the White House then…….. Obama will submit it to the foreign enemy…..This is really awesome……you are brilliant!!!!!

      • lvent says:

        TRILLIONS OF DOLLARS IN FRAUD: I guess if WE THE PEOPLE do this we will find out for sure what team Obama is playing for.. We better have our guns and bullets ready……just in case…..

      • lvent says:

        The foreign bastards could force Obama to declare martial law…..wait a minute. he won’t even have to that because he signed EXECUTIVE ORDER 13528…. which weakened the posse commitatus act of 1873…..He is set to sign another EO in a couple of weeks which will weaken our 2nd amendment rights even further and our right to keep and bear arms….CLTV in Chicago reported last week that the G-8, THE FOREIGN ENEMY IS MEETING IN MY HOMETOWN, CHICAGO next Spring and NATO IS JOINING FORCES WITH THE CHICAGO POLICE FORCE FOR CROWD CONTROL.. I say WTF??? WHO SAID?????? If NATO is allowed to do that what that will be is a SLAP IN OUR FACE BY OBAMA and that act will fly in the face of our freedom.

      • Where are all the other comments from others – are you asleep?

        My reseach on google about “hold harmless” is that this applies to when a contractor subcontracts another and they promise to hold harmless from whatever liabilities arise and doesn’t seem to apply to this or any other situations.

      • lvent says:

        TRILLIONS OF DOLLARS OF FRAUD, I don’t think we need to use HOLD HARMLESS in this situation. A real estate attorney who was the attorney at my orignal house closing did tell me to put this in a settlement agreement with the pretender lender for my commercial property which I decided against negotiating with those foreign owned financial terorists…At the time I wrote that comment I did not realize this was not a settlement agreement. I do think your are right on with your idea….Please let me know what I can do. I will be glad to help fight this tyranny in any way that I can…..

      • lvent says:

        Come on everyone!!!!!! We all need to get behind this brilliant idea that TRILLIONS OF DOLLARS OF FRAUD has come up with….We have to do this before they try and strip us of anymore of our rights or try to create new laws to make fraud legal…….imagine if they try to make cyberfraud legal…? Like MERS…??? We can’t let them get away with stealing anymore from WE THE PEOPLE……

  3. lvent says:

    The Fed was all in on the Ponzi Scheme and they are also all in on the cover-up.

    • lvent says:

      In reality the pretender lenders owe us money for collecting money on a loan they do not own…….Someone is owed this money is a very deceptive tool the judges are using to cover their asses for losing track of ownership to the loan. What the pretender lenders/servicers are doing is not only incredibly deceptive it is also illegal…They have to show proof, from the inception of the loan to today…

  4. lvent says:

    Sure they are not going to sell the houses with cloudy titles now the truth is becoming more and more apparent..These pretender lenders don’t own these loans or these property rights..They are criminals and the judges are aiding and abetting them…. Cloudy title means they lost track of ownership of your loan.. CNBC reported a couple of weeks ago that most of these fraudclosures are going to become rentals…..Don’t sign anything people. Chase sent my sister right to the title company to sign her rights away to her home because she did not know..The only signature that can start a new chain of title is the homeowner’s because the titlle is clean to the homeowner….That reconveyance clears the title. That is why they want YOU to sell your home….IT IS ANOTHER SCAM. ANOTHER COVER-UP…….

    • lvent says:

      All these pretender lenders want is the Credit Default Swap insurance which is worth 2-3 times the current value of the home……They are stealing every last dime they can out of these homes and they are using illegal means to receive more ill gotten gains… Fraudclosures are yet another cover up for their PONZI SCHEME..Don’t sign anything. I hear there are “investors” down in Florida renting people their own homes and buying fraudclosures with bad titles. They are parasites and they are preying on what you don’t know…What you do not know can hurt you…

      • lvent says:

        Whether they call it Liars Loans, improper assignment of the collateral lien, improper conveyance, bifurcation of the mortgage and note, MERS, faulty affadavit, fake release of mortgage, bogus assignee, cloudy title, robo-signing, back dated assignments they are just powder puff names for FRAUD……..they are trying to legitamize fraud and legalize crime to suit their needs by giving a nicer sounding name to a very serious and highly destructive crime…

      • lvent says:

        The above comment is for TRIED…….

    • Tried says:

      Clouded Title means they do not know many loans are actually shadowing your home, whether or not you even have a mortgage.

      • lvent says:

        Oh WOW, and doesn’t that mean like the same exact thing? Just put in nicer terms which they do not deserve……….

      • Clouds on title are all sorts of dubious documents of whatever form they appear in the records and is not limited to just mortgages and assignments, but also quit claims and anything else that brings the chain of evidence into a disconnection until the mistake or error or fraud is uncovered and remedied as may be required by quite title action involving court oversight to determine how the facts justify ownership of the title, whether legal or equitable.

  5. lies is all they tell says:

    why dont all 67 counties….when a house goes back to the bank buy it at auction and eith sell it back to the original homeowner so the famiy stays intact or rent. if its an investment property instead of letting properties sit grow mold and eventually lose a taxable income???? by now all the counties must know the fraud going on in the origination, the title, modificatio fraud, and fraudclosure. take my situation when i go to court. i was told to stop paying by wells fargo. i didnt one day wake up and say well iam not going to pay my mortgage today. i was told to not pay. does the bank deserve a free house no. did the banks tell us all the deal with these loans that they were going ot be stock and they didnt really loan us the money and the real lender is not even on our note. then they go and tell appraisers do not come in at sale price anddo not expect any more business so appraisers had to do the dispicable and use comparables they would never use in different situations. homes flipp with in 6 months. homes sold and resold in 15-17 days, straw buyers used to raise prices. mortgage application fraud raising salaries to meet underwriting standards when homeowners were out of town buys and they had the original paycheck stubs whats 500- to 700 bucks here or there going to do and the peopel get the house they want. then of course robo signing. then the moster of all modification fraud losing paper work, moving files. the counties need to protect the homeowners and we can not be protected from our AG and government the each individual florida counties 67 of them need to play the banks at there own game. once they buy these homes and sell or rent to the original homeowner . they stablize our childrens live and the family can appeal the judgement. so awful letting these homes it vacant growing mild and getting eatin by termites. in my area alone i have seen horrid stuff. a bees nest in a hoime, a fire , grass 10 feet high. its a mess. if the people were only aloud to stay. we do not have uyers here the homes just sit. so eveyrone reading this florida lets write our comissioners and say hey stop the banks from getting these homes. save our tax base. remind them of judge cook in tampa whose husband is presidnet of community bank and her penssion are directly tied to banks but she is not bias when she has a fore closures. paleeze how could she not be. we need to get involved here and stop this r avaging of florida

    • lvent says:

      Those people never had to leave their homes they are paid for free and clear because of the Ponzi Scheme. That is the deception, these pretender lenders lost track of ownership of these loans at the ORIGINATION…No one should have to buy these homes back for the homeowner…The homeowner owns their home since ORIGINATION where the paid deed was conveyed to the homeowner.. Our title is clean…they lost track of ownership by many illegal conveyances that were never recorded and their title is cloudy. Give the people back their stolen homes. If there is any fraud anywhere in the loan history they killed their contract and they should walk away, Clear title automatically goes back to the homeowner, they are the only one who can prove ownership of the property…..God Bless America, Death to the Foreign Tyranny!!!!!!!

    • lvent says:

      The illegal foreclosures must be stopped..

  6. Beth A. says:

    I wonder about all of the foreclosed properties in FL and other humid southern states — after months and months and month ++ without air conditioning and care. They must turn into mold factories with insect infestations.

    RESET NEEDED. Banks need to walk away from properties w/clouded title.

    • lvent says:

      They don’t care about us…All they care about is the insurance money….They have our homes insured to the hilt. Anyone can buy insurance on your home and say they own it. This is sick.

      • lvent says:

        They probably take out extra insurance that covers mold…They don’t care about us. They just come up with more and more ways to make money off of their Ponzi Scheme and our homes..

    • see says:

      The banks want the deed to the poperty. They don’t give a crap about the house.

      • lvent says:


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