How Will California’s Housing Market Respond to the Ridgecrest Earthquake?

A short-term housing slowdown is expected in the California metros hit by last week’s Ridgecrest earthquake, MarketWatch reports. 

While most homes were spared significant damage, the string of powerful earthquakes that rocked Southern California last week served as a strong reminder that “The Big One” could strike at any time.

These fault lines run through many of the most expensive housing markets in the country — including San Jose, San Francisco and Los Angeles. But recently, these markets have started to show signs of weakness as years of home-price appreciation have pushed so many would-be buyers to the sidelines.

Danielle Hale, chief economist at Realtor.com said she expects a slowdown in the short-term in the housing market in and around Ridgecrest, Calif, a town near the epicenter of last week’s quakes. Meanwhile, demand will likely increase in nearby markets that escaped with less property damage as would-be Ridgecrest residents look elsewhere. Like other parts of California, home prices in Ridgecrest had already flattened over the last year.

A 2016 study from the Federal Reserve Bank of Cleveland found that prices declined between 3% and 4% after a home experienced an earthquake of 4.0 to 5.0 intensity of the Modifed Mercalli Intensity scale, another form of measuring the strength of temblors other than the moment magnitude scale. More major quakes, those with an intensity above 6, led to a price drop of up to 9.8%.

Read more