## Nobody's Home: MIT Economist Measures How Much Foreclosures Lower Housing Prices

A new study by an MIT economist has found that foreclosures can lead to a significant decline in housing prices in the surrounding area. The study, which was published in the _American Economic Journal: Economic Policy_, found that a single foreclosure can lead to a decrease in housing prices of up to 1%.

The study's author, Andreas Fuster, used data from the city of Cleveland to examine the impact of foreclosures on housing prices. He found that the effect of foreclosures was strongest in neighborhoods with a high concentration of low-income and minority residents.

Fuster's study is the latest in a growing body of research that has found that foreclosures can have a negative impact on the housing market. Previous studies have found that foreclosures can lead to a decrease in property values, an increase in crime, and a decline in the quality of life in the surrounding area.

The findings of Fuster's study have important implications for policymakers who are trying to address the problem of foreclosures. The study suggests that policies that reduce the number of foreclosures can also help to stabilize the housing market and protect the value of homes.

Key Findings of the Study

* A single foreclosure can lead to a decrease in housing prices of up to 1%.

* The effect of foreclosures is strongest in neighborhoods with a high concentration of low-income and minority residents.

* Foreclosures can lead to a decrease in property values, an increase in crime, and a decline in the quality of life in the surrounding area.

Policy Implications of the Study

The findings of Fuster's study suggest that policies that reduce the number of foreclosures can also help to stabilize the housing market and protect the value of homes. Such policies could include:

* Providing financial assistance to homeowners who are at risk of foreclosure.

* Making it easier for homeowners to modify their loans.

* Encouraging banks to work with homeowners to avoid foreclosure.

By taking these steps, policymakers can help to reduce the negative impact of foreclosures on the housing market and protect the value of homes.