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
