Shale Gas Developments and Home Prices

The extraction of natural gas using underground drilling techniques — generally called fracking — is very controversial. Supporters say it will help the country to become energy independent, while detractors worry about environmental and health issues, says host Mary Walden. She asks her husband, N.C. State University economist Mike Walden, “Do we have any way to evaluate these concerns?”

Mike Walden: Mary, we want to focus today on those environmental health issues; one way is to do studies. There have been many studies done (for example, in Pennsylvania) that look at the impact of fracking on water quality and other kinds of environmental issues. But a more general way to do it is to say that, whether these concerns are real or not, if there are concerns, these should be reflected in home values in the area where the fracking occurs.  And on this point we have a brand new study from the prestigious National Bureau of Economic Research. It’s the longest-running non-partisan, non-profit, economic think tank in the country. They used data from Pennsylvania and from New York and went from the traditional ways of making sure you’re isolating the impact of one fact on housing prices.  And they did come to the conclusion, at least right now, fracking can have a negative impact on home values in the area where the fracking occurs. And that seems to be within about a mile radius. They found that, on average, when fracking occurs, home values within that local area will go down about sixteen percent, if the home is getting its water from underground sources. If, however, the homes in the area are using piped water (that is, they’re tied into a city system), then there is no negative impact — and in fact there’s some evidence of maybe a positive impact from fracking, with the expectation there may be some additional royalty payments to homeowners. So this is a very, very complicated issue, but this at least is one way to follow what the market is feeling as the overall impact of fracking.