The Post-Foreclosure Experience in America

 

4.) Post-foreclosure migration distance:  Approximately one fifth of post-foreclosure move to a new labour market meaning that most have a desire to remain within their current local job market.  Slightly more than half of post-foreclosure migrants cross tract boundaries but remain within the same county.  Less than 10 percent remain within the same tract with the balance moving a further distance away; of the total, about 20 percent move to a new metropolitan area.

 

In summary, the paper by Molloy and Shan lays to rest some myths about the outcome of the foreclosure process on the millions of affected American households.  Most importantly, the massive number of foreclosures in America over the past 3 years has not impacted the overall consumption of housing perhaps because demand for housing is relatively inelastic (i.e. we need a place to live).  As is commonly believed, post-foreclosure households tend to change their composition more than normal and are less likely to live in owner-occupied housing.  They tend to move to more urban, higher density, single family homes in roughly equivalent neighbourhoods after losing their homes to foreclosure.  Surprisingly, only about half of borrowers whose mortgages enter foreclosure have moved within the first two years indicating that many foreclosures are refinanced.  Household size tends to remain constant and few post-foreclosure individuals appear to move in with their parents for financial support.  It does appear, however, that post-foreclosure individuals are less likely to have a credit card and those that do, have a lower overall credit limit.

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