Association for Public Policy Analysis & Management

Panel: New Insights into the Causes and Consequences of the Foreclosure Crisis

(Housing and Community Development)

Plummeting housing values between 2007 and 2010 led to an unprecedented wave of foreclosures and a dramatic rise in unemployment. While scholars have dedicated substantial attention to the causes and consequences of the Great Recession, there remain numerous unanswered questions about the confluence of factors that led to the collapse of the housing market as well as the wide range of impacts on individuals and communities differentiated by race and class. This panel brings together policy researchers studying unique aspects of the foreclosure crisis to better understand the broad and continuing consequences of this important period. The first paper in our panel explores a heretofore understudied aspect of household financial risk leading up to and during the foreclosure crisis: college tuition. Findings indicate that the substantial costs of sending children to college put many families at risk of foreclosure as unemployment rose, home values plummeted, and refinance credit dried up. The second paper examines the relationship between housing price growth, housing quality, income, and buyer credit access during the housing boom and bust. The authors present evidence that higher income buyers were purchasing homes, and potentially driving up housing values, in lower-income neighborhoods. The third paper leverages a unique dataset linking mortgages to property parcel foreclosure records to investigate heterogeneity of experience within Asian and Latino communities. Results show tremendous diversity across ethnic origins and citizenship statuses in foreclosure rates and lender relationships. Finally, the fourth paper explores an important and understudied aspect of the foreclosure crisis: post-foreclosure residential outcomes. The authors use data from the Panel Study for Income Dynamics to show racial variation in the neighborhood dynamics of foreclosure migration. The inclusion of these four papers, each analyzing a different aspect of the foreclosure crisis, will provide policymakers with new insight into the factors responsible for and ongoing impact of the greatest economic downturn in almost a century. It will also shed light on disparities across race and class, differences in outcomes for individuals and communities, and the role of housing market dynamics in maintaining inequality.