Examining the role of urban spatial structure, housing submarkets, and economic resiliency in U.S. residential foreclosures, 2000-2009

After a relative period of growth (2000-06), the U.S. economy experienced a sharp decline (2007-09) from which it is yet to recover. One of the primary factors that contributed to this decline was the sub-prime mortgage crisis, which triggered a significant increase in residential foreclosures and a slump in housing values nationwide. Most studies examining this crisis have explained the high rate of foreclosures by associating it with socio-economic characteristics of the people affected and their financial decisions with respect to home mortgages. Though these studies were successful in identifying the section of the population facing foreclosures, they were mostly silent about region-wide factors that contributed to the crisis. This resulted in the absence of studies that could identify indicators of resiliency and robustness in urban areas that are affected by economic perturbations but had different outcomes. This study addresses this shortcoming by incorporating three concepts. First, it situates the foreclosure crisis in the broader regional economy by considering the concept of regional economic resiliency. Second, it includes the concept of housing submarkets, capturing the role of housing market dynamics in contributing to market performance. Third, the notion of urban growth pattern is included in an urban sprawl index to examine whether factors related to sprawl could partly explain the variation in foreclosures. These, along with other important socio-economic and housing characteristics, are used in this study to better understand the variation in impacts of the current foreclosure crisis. This study is carried out for all urban counties in the U.S. between 2000 and 2009. The associations between foreclosure rates and different variables are established using spatial regression models. Based on these models, this dissertation argues that counties with higher degree of employment diversity, encouragement for small business enterprises, and with less dependence on housing related industries, experienced fewer foreclosures. In addition, this thesis concludes that the spatial location of foreclosed properties is a function of location of origination of sub-prime mortgages and not the spatial location of the properties per se. Also importantly, the study found that the counties with high number of dissimilar housing submarkets experienced more foreclosures.