Although real estate values theoretically reflect the mutual agreements of buyers and sellers, a negotiated sales price has meaning only if mortgage money is committed to consummate the sale. Lending institutions tend to make conservative decisions based on the confirmation of value by an appraiser. An appraiser considers a variety of depreciating factors, including perceptions of crime and fear of crime. The downward spiral of property values is a continuous process which consists of five stages. In the first stage, neighborhood residents perceive crime. Fear of crime results and compounds as it is observed by other residents and nonresidents. Potential buyers and appraisers observe the fear, which results in the weakening of the neighborhood real estate market. Investment money available to the neighborhood becomes scarce as lenders become wary of the crime-induced instability of the neighborhood real estate market. Neighborhood vitality declines as crime, unstable real estate values, and the scarcity of investment capital combine with other aspects of neighborhood decline. To break the downward spiral, efforts should focus on encouraging community participation and cooperation with police to reduce the level of crime. Real estate brokers and appraisers should receive facts regarding the known incidence of crime. Appraisers should also receive training to recognize rehabilitation efforts and neighborhood crime prevention efforts. Neighborhood efforts should include the interpretation of crime statistics and attempts to convince residents that unfounded fears undermine their real estate investment. A reference list containing 380 sources is located at the end of the volume containing this paper.