Ron Cheung, Chris Cunningham, and Rachel Meltzer
Working Paper 2013-18
December 2013

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Experiences reveal that the monitoring costs of the foreclosure crisis may be nontrivial, and smaller governments may have more success at addressing potential negative externalities. One highly localized form of government is a homeowners association (HOA). HOAs could be well-suited for triaging foreclosures, as they may detect delinquencies and looming defaults through direct observation or missed dues. On the other hand, the reliance on dues may leave HOAs particularly vulnerable to members' foreclosure. We examine how property prices respond to homeowner distress and foreclosure within HOA communities in Florida. We combine data sets of HOAs, sales and aggregate loan delinquency, and foreclosures from 2000 through 2008. We find properties in HOAs are relatively less affected by more distressed neighbor homes compared with non-HOA properties, but only when considering less severe delinquency rates. We also find that negative price effects from higher delinquency exposure rates are ameliorated for properties in larger and newer HOAs.

JEL classification: R00; R21; R31

Key words: associations, foreclosures, delinquency, house prices

The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Please address questions regarding content to Ron Cheung (corresponding author), Oberlin College, Rice Hall 233, 10 N. Professor Street, Oberlin, OH 44074, 440-775-8971,; Chris Cunningham, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470,; or Rachel Meltzer, the Milano School of International Affairs, Management and Urban Policy, the New School, 72 Fifth Avenue, Room 503, New York, NY 10011,

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