According to the ""Center for Responsible Lending"":http://www.responsiblelending.org (CRL), the impact of the foreclosure crisis not only has devastating consequences for the displaced households, but in its wake, the ""spillover"" effect is eating away at the value of nearby homes by startling sums.
A ""recent report"":http://www.responsiblelending.org/mortgage-lending/research-analysis/soaring-spillover-accelerating-foreclosures-to-cost-neighbors-436-billion-in-2009-alone-73-4-million-homes-lose-5-900-on-average.html from the consumer advocacy group says that in 2009 alone, foreclosures will cause 69.5 million nearby homes - most of which are owned by families who are paying their mortgages on time - to suffer price declines averaging $7,200 per property. Based on CRL's new projection of 2.4 million foreclosures in 2009, that results in a $502 billion total decline in neighboring property values.
CRL says homeowners that live within 300 feet of a foreclosed home can expect to see at least a 1.3 percent drop in the value of their own property. For those within 300 to 500 feet, values will decline at least 0.6 percent.
Over the next four years, CRL estimates 9.0 million foreclosures will occur. The organization's study says these foreclosures will cost 92 million families some $1.9 trillion in lower home values - an average of $20,300 in lost wealth per household.
These projections—representing only property value declines caused by nearby foreclosures, not other price drops associated with short sales or the slowdown in local housing markets—are based on CRL research combined with data from Credit Suisse, Moody's Economy.com, and the Mortgage Bankers Association.