On foreclosure rates and the house price index: A cross-sectional analysis
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This paper attempts to firmly establish the dependence of house price index on foreclosure rates, a prerequisite to substantiating “let-sink” foreclosure policy. In our paper, we first examine a simple linear regression model to show that there are omitted variables in the model, and therefore, more variables other than just foreclosure rates have to be considered. We then continue with the multiple linear regression model by looking at the influence of foreclosure rates, education, property tax, income tax, stimulus, and legal system upon house price index. By using this model, we show that most variables do not have statistical significance, individually or jointly, except for foreclosure rates and legal system. Finally, we reject the null hypothesis and conclude that house price index is significantly dependent upon foreclosure rates and the state legal foreclosure system.