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Kellogg-Booth Study Examines “Walkaway” Phenomenon in Real Estate

OUTER LIMITS: Professor looks to distant suburbs as site for potential walkaways

Unlike some regions of the country, Chicago hasn’t yet had a big problem with “walkaways”—incidents where homeowners abandon mortgaged homes because of their diminished value. But if those walkaways come in larger numbers here, says Paola Sapienza, a finance professor at Northwestern’s Kellogg School of Management, they will most likely occur in the newer subdivisions of the outer-ring suburbs. When foreclosures and big price drops hit neighboring homes in older communities, she notes, many homeowners decide that their own property is “so much nicer [than their neighbors’], it’s still worth much more.” But, she says, in newer subdivisions, where most of the homes are very similar to one another, that comfort is harder to come by. Sapienza is tracking the walkaway phenomenon with Luigi Zingales, a professor at the University of Chicago’s Booth School of Business.

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