Club classification of foreclosure rates in Spain

This study examines the evolution of per capita foreclosures across Spanish provinces (NUTS III regions) from 2001 to 2019 using a cluster algorithm. This method allows us to assess whether foreclosure rates exhibit convergence patterns across provinces. Several distinct convergence groups are identified, with provinces within each group displaying similar trajectories in foreclosure rates, although not necessarily in their levels. To explore potential structural changes over time, the analysis is conducted separately for the pre-reform and post-reform periods surrounding the 2012 national legal reform. In addition, the sample is divided into pre-crisis and post-crisis subperiods to account for the possible impact of the 2008 global financial crisis. The results indicate substantial heterogeneity in foreclosure rates during the pre-crisis and pre-reform years, consistent with the existence of multiple convergence clubs. In contrast, during the post-2008 period, foreclosure rates are found to converge into a single club. While this temporal pattern coincides with the financial crisis, the empirical approach is descriptive and does not allow for causal identification. Therefore, the findings should be interpreted as evidence of changing convergence dynamics rather than as proof of specific policy or crisis effects. Finally, the analysis of factors associated with club classification suggests that differences in the share of foreign population are systematically related to the probability of provinces belonging to the same convergence group.