Foreclosure and Housing Market Dynamics: Evidence From Milwaukee

This paper examines the impact of foreclosure on housing values in Milwaukee, Wisconsin, using a property-level panel constructed by linking mortgage transaction data from Black Knight, borrower characteristics from the Home Mortgage Disclosure Act (HMDA), and assessed home values from Milwaukee County's Master Property File (MPROP) over 2007-2020. Employing both static panel models and an augmented interrupted time series (AITS) event-study framework, we trace the dynamic evolution of home values before and after foreclosure. While a static specification yields an average depreciation of 8.12%, the event-study reveals that the effect peaks at approximately 13% around four years post-foreclosure, reconciling our findings with larger estimates in prior literature. Our analysis uncovers pronounced racial disparities: Black and non-Black homeowners follow similar pre-foreclosure trajectories, but Black homeowners experience substantially larger and more persistent post-foreclosure declines. We document a novel role for loan duration, with each additional year of ownership prior to foreclosure associated with a 1.71% decline in value-a finding we validate using the AITS framework as reflecting genuinely different post-foreclosure dynamics rather than a statistical artifact. Finally, homes in areas with foreclosure rates above the 90th percentile experience substantially more severe value reductions, consistent with threshold spillover effects. These findings highlight how foreclosure's consequences vary across race, ownership duration, and neighborhood context.