Survey Shows Impact of Foreclosures on Local Communities

It's a myth that property owners and renters are the only victims of the economic crisis that has resulted in the foreclosure of millions of homes in the United States. The reality is that foreclosures, especially when clustered, affect entire communities economically, emotionally and psychologically.

Psychological impacts and economic decline linked to foreclosures

While most complaints - overgrown lawns, property damage and garbage dumping - seem relatively minor, they can cause psychological impacts and economic decline that follow other foreclosures crises in the past.

Several studies have previously shown that the effect on a neighborhood with several foreclosures can result in economic hardship for neighbors and businesses. A study by Fannie Mae in 2006 showed that one foreclosure listing within an eighth of a mile of a home could reduce its property value by 0.9 percent. Another study in Chicago valued the decline from one foreclosure at $1,870 per property within an eighth of a mile.

More insidious, however, are the psychological and emotional effects of foreclosures on a neighborhood. The evidence of neglect often attracts squatters, vandals and criminals, leaving a neighborhood appearing disheveled and abandoned. This creates a spiral of despair among those left behind.

(Source) Press