The FINANCIAL -- RealtyTrac and Greenfield Advisors , one of the leading economic and real estate research firms, on April 4 released an analysis of the unprecedented gas leak in Porter Ranch, California, on the local housing market, and also calculated the potential impact on other local housing markets from 319 underground natural gas storage facilities across the country.
Out of the 117 million homes available for search on RealtyTrac’s property pre-diligence website, www.HomeDisclosure.com, 4,826,374 (4 percent) worth an estimated $1.3 trillion in cumulative market value are within a 10-mile radius of an underground natural gas storage facility like the one that leaked in Porter Ranch. The website allows consumers to find out if a home they own or are interested in buying is within a 10-miles radius of an underground natural gas storage facility and provides detailed information about each of these facilities.
The Porter Ranch analysis shows that in the three months following the discovery of the gas leak in late October 2015, home sales in the Porter Ranch zip code (91326) plunged 44 percent while the share of all-cash sales spiked 50 percent during the same time period. Meanwhile, the median home sales price in Porter Ranch in the three months following the discovery of the gas leak dropped 1 percent.
“Such a spike in the percentage of cash sales in an area in such a short period of time certainly indicates a market disruption,” said Dr. Clifford A. Lipscomb, Director of Economic Research at Greenfield Advisors. “Market disruption is further signified by the number of families that requested relocation out of the Porter Ranch area as well as the number of health effects reported by area residents. Also, with further research, you might find that lenders are less willing to lend on a property located in the Porter Ranch area.”
“While median home prices have somewhat surprisingly held steady in the wake of the gas leak discovery, the sharp drop-off in sales paired with the spike in cash sales indicates quickly eroding demand for homes in Porter Ranch, particularly from buyers who rely on financing — far and away the majority of buyers in the housing market,” said Daren Blomquist, senior vice president at RealtyTrac. “The impact of the gas leak is even clearer when sales within the ZIP code are plotted on a map. Sales north of Highway 118 — closer to the actual gas leak where higher levels of methane have been documented — are down 60 percent, while sales south of the 118 are down 14 percent.”
44 percent drop in sales more than twice the typical seasonal drop
Although a seasonal drop in home sales is typical in the three-month period from November to January, the 44 percent drop in the Porter Ranch ZIP code was more than two times the drop during the same time period countywide in Los Angeles County (17 percent seasonal drop); statewide in California (18 percent seasonal drop); and also well above the seasonal drop of 25 percent nationwide, where some housing markets are more heavily impacted by weather during the late fall and winter months.
Furthermore, the 44 percent decrease in home sales in the three months following the discovery of the gas leak was also more than twice the average seasonal drop (16 percent) in the Porter Ranch ZIP code during the same three-month period in each of the past five years.
50 percent increase in share of cash sales five times the countywide increase
The 50 percent spike in the share of cash sales in the three months following the discovery of the gas leak was five times the increase in share of cash sales countywide in Los Angeles County during the same time period (up 10 percent); more than four times the increase in share of cash sales nationwide during the same time period (up 11 percent); and more than three times the increase in share of cash sales statewide in California during the same time period (up 14 percent).
Furthermore, the 50 percent increase in share of cash sales in three months following the discovery of the gas leak was also more than twice the average seasonal increase in cash sales share (23 percent) in the Porter Ranch ZIP code during the same three-month period in each of the past five years.
Facilities posing most potential risk to local housing markets
Using the RealtyTrac data, Greenfield created three indexes calculating the potential risk that each of the 319 underground natural gas storage facilities poses to its local housing market. One index is based on the total cumulative property value of single family homes and condos within 10 miles of the facility. The second index is based on the total cumulative property value of single family homes and condos within three miles of the facility. The third index is a weighted index based on a combination of total single family homes and condos within 10 miles of the facility and the risk associated with the flow of gas into the facility based on a ratio of the maximum daily delivery volume to working gas capacity.