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Fri May 2, 2014
Home Values Drop Amid Energy Booms
When there’s an energy boom, it usually brings an influx of workers into the area. And that leads to more demand for housing. That’s great for landlords who are looking to rent out their properties. But as some communities in Wyoming are finding, oil and gas drilling can actually be a problem for people who are looking to sell. Wyoming Public Radio’s Willow Belden reports.
WILLOW BELDEN: Rhonda Holdbrook owns a real estate firm in Douglas, and she’s exceptionally busy these days. Oil production in Converse County is booming, and energy workers have flocked to town.
RHONDA HOLDBROOK: Rentals are very hard to come by. They’re very high-priced. … Rent could be 25-hundred dollars a month for a two- to three-bedroom.
BELDEN: But the market for renting and the market for selling are two different things. Kristi Mogen lives just outside of Douglas in a modest, single-family home. She raises cows, chickens, and goats, and grows vegetables in the summer. Mogen says her family used to love living here. But a few years ago, oil wells were drilled across the road from their neighborhood.
KRISTI MOGEN: You can see a rig right there through the trees.
BELDEN: Mogen says the energy development has been a nightmare. Truck traffic on the dirt roads kicks up storms of dust. Foul odors sometimes waft through their windows. And when the wells were first put in, the noise from drilling rigs and flares kept the family up at night.
MOGEN: We, in our home, could not have a conversation over the flares.
BELDEN: After a nearby well blew out two years ago, spewing gas into the air, Mogen’s children started having nose bleeds. And she and her husband have been diagnosed with hormonal problems. Doctors have not linked those issues to the nearby energy production, but Mogen thinks they’re related, and she wants to get her family out.
MOGEN: We need to go. Our family’s health is more important than anything else.
BELDEN: It’s not easy to go, though. Mogen says her house has been on the market for nearly a year, and she’s gotten no offers. Even if the house does sell, Mogen says it will probably be at a loss. She claims realtors told her to expect about $70,000 less than the house was appraised for a few years ago. Because of that, Mogen is not sure if her family can afford to move.
MOGEN: What are we going to have for a down payment? You know, what are we going to have to move on with?
BELDEN: Mogen thinks the oil wells are to blame for her house not selling. But realtors aren’t so sure. Broker Rhonda Holdbrook says there are many factors that determine whether or not a house sells...
HOLDBROOK: Location, neighborhood, covenants, bad condition. … I don’t see the oilfield being a problem.
BELDEN: Other area realtors say the same thing. But several studies do point to energy development being a problem for homeowners. Researchers at Duke University looked at real estate in Pennsylvania, and found that homes within one kilometer of gas wells decreased in value by 22 percent, at least if they relied on ground water. A study in Weld County, Colorado found a similar trend. Alex James at the University of Oxford is one of the authors of that report.
ALEX JAMES: If you move a home 1 kilometer closer to a well, that will result in a $15,000 depreciation in its value. And given the data set that we’re working with, that amounts to about a seven percent reduction in home price.
BELDEN: James says part of the reason prices are dropping is exactly what you’d expect: The view from the front porch isn’t as nice if there’s a well pad on the horizon, and people don’t like the noise and commotion associated with production. But there’s another issue. James says people tend to fear fracking, even if no environmental or health problems have been documented in the area.
JAMES: When somebody’s make a home purchasing decision, they’re not basing their decision off of ‘What does the scientific evidence say about the likelihood of a fracked well contaminating my water supply?’ They’re looking at a New York Times article about how puppies in Pennsylvania are being born without legs and cleft palates and things.
BELDEN: In places where environmental problems have been documented, property values have slumped even more. In Pavillion, where the Environmental Protection Agency tentatively linked groundwater contamination to fracking, the County Board of Equalization determined that affected houses were worth 50 percent less than before.
Economists are quick to point out that despite the decrease in property values, oil and gas booms are generally good for local economies, for example because average incomes go up.
JAMES: But if you’re a homeowner and your wage doesn’t increase due to the fracking boom, and your neighbors put a well pad in their back yard, … you’re going to lose. Your home is going to be worth less and your income is not going to go up.
BELDEN: Chris Timmins, who co-authored the study out of Duke University, says the ironic problem is that there just aren’t enough people in that situation.
CHRIS TIMMINS: The negative impacts can be on a very small number of people, and that can make them easier to ignore. … If there’s big benefits to a large number of people and the negative impacts are on a small number of people, the political economy of that can lead to things working out for the drillers. I mean there’s just not the right kind of opposition.
BELDEN: And he says that means that as more wells are drilled, nearby homeowners could be the people who stand to lose the most from energy booms. For Wyoming Public Radio, I’m Willow Belden.