How Environmental Disasters Affect The Housing Market

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May 17, 2016

Just before Halloween 2015, residents of a high-end master-planned development located about 35 miles outside of Los Angeles were experiencing nausea and nosebleeds and  complaining of a foul odor that seemed to have draped itself all over the area like a wet blanket. It wasn’t some demon worthy of its own Halloween movie causing these things, but a gas leak in a Southern California Gas Company underground natural gas storage facility.

Months later, after 2,500 families had been relocated, multiple lawsuits had been brought against the gas company, and California Gov. Jerry Brown declared a state of emergency, the effects of the leak are still being felt, especially in the local housing market, RealtyTrac reports.

According to Mamdouh Elalami, a real estate broker whose territory includes Porter Ranch, homes are staying on the market for much longer than they used to and sellers are being forced to drop the price. For example, one client had an offer for his home of $3.2 million one year ago. But after the leak was discovered, he ended up selling the property for $2.8 million. Elalami estimates that sellers in Porter Ranch are reducing their asking prices by 8 to 10 percent in order to sell their homes.

Flint, Mich. has also experienced its own very public environmental debacle involving tainted water. Banks began to balk at financing home purchases in Flint due to this, but they were also hesitant to finance homes in surrounding areas. The East Central Michigan Association of Realtors had to resort to calling lenders and explaining to them their houses were not in the city of Flint and were not suffering from the same problems as the Flint system.

In the first two months of 2016 median home prices in Flint dropped 21 percent compared to the first two months of 2015. During this same time period national home prices grew 8 percent and Michigan home prices increased 18 percent.

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