The Characteristics of Resilient Neighborhood Housing Markets During and After the Housing Crisis
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Since the Great Recession, housing market resilience has been of critical interest to academicians and practitioners who have raised the question of why some neighborhoods are more affected by financial crises than others. To answer this question, this study explores the determinants of resilience in the housing market at the neighborhood level in the context of metropolitan areas during and after the recent U.S. housing crisis. This study specifically examines housing market resilience pertaining to three areas: the stabilization process of U.S. metropolitan housing markets over the periods of boom, bust, and recovery from 2000 to 2014 in various metropolitan types, the characteristics influencing the resilience of neighborhood housing markets, and the dynamics of lower-income neighborhoods. Using three housing performance indicators—home values, foreclosures, and home lending—and various neighborhood and metropolitan variables for 368 metropolitan areas and their nested neighborhoods, this study employs multilevel models of neighborhood change that accommodate the panarchy system of resilience and spatial econometrics methods controlling for spatial autocorrelation. The results show that although most U.S. housing markets are in a process of gradual stabilization as of August 2014, the gap between the home values of resilient and non-resilient markets became much larger after the economic crisis. This study also finds that resilient neighborhood housing markets benefit from more robust socioeconomic, physical, and political characteristics. Specifically, federal recovery financing programs, such as NSP2 and NSP3, help the hardest hit communities in resilient regions regain home values while NSP1 contributes to reductions in foreclosure rates across the nation. Neighborhoods with more racial diversity and high education attainment and income consistently contribute to housing market resilience across the nation. The results of some characteristics in the hardest hit and bounce back resilient markets differ from those of other types of markets, including the effects of auto dependency, income inequality, industrial diversity, foreign-born populations, and a longer commute time. Finally, the results indicate that lower-income neighborhoods in volatile and/or non-resilient housing markets suffer more from the economic shock than those in stable and/or resilient markets. The characteristics of resilient neighborhoods suggest that we are able to mitigate neighborhood decline during and after a housing crisis by establishing sound and robust planning and housing policies. Such policies include establishing strong government recovery financing programs, encouraging more sustainable urban form by minimizing auto dependency, creating racially, economically, and industrially diverse neighborhoods, and providing considerable assistance to lower-income neighborhoods. Through such efforts, the U.S. housing market should become less vulnerable and more resilient to the impact of economic downturns.