SOCIETÀ ITALIANA DI DIRITTO ED ECONOMIA
Rafael González-Val (Universidad de Zaragoza)
Abstract
In this paper, we study the evolution of the Spanish foreclosure rates (defined as the number of judicial foreclosures per 1,000 inhabitants) across the 50 Spanish provinces (NUTS III regions) during the period 2001(Q1) to 2019(Q4), using a cluster algorithm. This methodology allows us to determine the existence of foreclosures convergence among the Spanish provinces. We use the Phillips and Sul (2007, 2009) panel convergence method.
Results show that the Spanish province-level foreclosure rates do not converge in only one convergence club; rather, we identify ten foreclosure convergence groups when all the period is considered. Nevertheless, during this period there was a major negative shock, the global financial crisis in 2008. As a consequence, there was a dramatic increase in foreclosures in all regions. The main governmental response to this crisis was an important change in legislation, the legal reform passed in 2012 to protect mortgage debtors. Under the new regime, it is difficult for low-income debtors who meet certain requirements to be evicted. To explore the possible effects of these events, we split the sample in two sub-periods (pre-crisis, 2001(Q1)–2008(Q4), and post-crisis, 2009(Q1)–2019(Q4)). We observe strong differences in the number of groups and their composition when using the entire sample and the post-crisis period. Surprisingly, in the post-crisis period no club classification is obtained, as all provinces are classified in the same club. Therefore, there were different paths across regions before the crisis, but after the shock foreclosure rates in all provinces converged to the same path.
Supplementary analysis of the possible factors related to the club classification in the pre-crisis period is carried out. Furthermore, the cluster analysis is also applied to the relative number of mortgage loans (defined as the number of mortgage loans per 1,000 inhabitants) for the period 2007(Q1) to 2019(Q4). This time data is only available for the post-crisis period. Results support convergence in the relative number of mortgage loans within six convergence clubs, pointing to six different patterns across the Spanish regions.