Survey Says: Neighborhood Fracking Results in 25% Decrease in Home Values

From Daily Real Estate News, December 20, 2013

An expansion of new oil and gas drilling technology known as “fracking” is prompting more industrial activity inside middle and upper-middle-class residential neighborhoods, Reuters reports. Millions of American home owners are suddenly finding themselves living within miles of drilling activity, and concern is growing over how this will affect their home values.

“You go to buy a home, you see that it has a well pad in the backyard, and essentially you might say I’m not willing to pay very much for this house,” Elisheba Spiller, an economist at the Environmental Defense Fund, told Reuters. “That’s where the drop in value comes in.”

A recent survey of 550 people found that the majority of people would not purchase a home near natural gas drilling. The University of Denver study, for publication in the Journal of Real Estate Literature, found up to a 25 percent decrease in bid value of homes near fracking.

“There’s a stigma,” Ron Throupe, one of the study’s authors, told Reuters.

Other studies have been finding an effect to property values too, particularly due to a perceived risk among the public of water contamination of living near the wells.

Shale gas drilling within a 0.6 mile of a home can decrease property values by an average of 16.7 percent if the house depends on wells – not municipal sources – for its drinking water, according to research by Spiller and other economic professors. The study analyzed home values in 43 counties in New York and Pennsylvania. The study had inconclusive results for the impact on property values of homes near shale gas wells that had water piped in from the municipalities.

Brian Straessle, a spokesperson for the American Petroleum Institute who declined to comment on the study, told Reuters that the “energy boom” has been a good thing for home owners and the nation. American home owners’ energy bills have shrunk by an average $1,000 a year and the energy industry has sparked “massive job growth” in pockets across the country.

“Oil and natural gas has been a big, bright spot in our economy for quite some time now,” Straessle said. “You need to think of all the folks who, because this industry is creating these jobs, have neighbors who are back to work and who have homes that are not foreclosed on.”

Source: “Analysis: U.S. drilling boom leaves some homeowners in a big hole,” Reuters (Dec. 12, 2013)