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Earthquakes and House Prices: Evidence from Oklahoma

Author

Listed:
  • Ron Cheung
  • Daniel Wetherell
  • Stephan D. Whitaker

Abstract

This paper examines the impact of earthquakes on residential property values using sales data from Oklahoma from 2006 to 2014. Before 2010, Oklahoma had only a couple of earthquakes per year that were strong enough to be felt by residents. Since 2010, seismic activity has increased, bring potentially damaging quakes several times each year and perceptible quakes every few days. Using hedonic models, we estimate that prices decline by 3 to 4 percent after a home has experienced a moderate earthquake measuring 4 or 5 on the Modified Mercalli Intensity Scale. Prices can decline up to 9.8 percent after a potentially damaging earthquake with intensity above 6. The correlations between measures of low intensity (MMI 3) quakes and prices are smaller and vary between specifications. Our findings are consistent with the experience of an earthquake revealing a new disamenity and risk which is then capitalized into house values.

Suggested Citation

  • Ron Cheung & Daniel Wetherell & Stephan D. Whitaker, 2016. "Earthquakes and House Prices: Evidence from Oklahoma," Working Papers (Old Series) 1631, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:1631
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    Citations

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    Cited by:

    1. Giuliano Masiero & Michael Santarossa, 2020. "Earthquakes, grants, and public expenditure: How municipalities respond to natural disasters," Journal of Regional Science, Wiley Blackwell, vol. 60(3), pages 481-516, June.
    2. Andrew Tracy & Amy Javernick-Will, 2020. "Credible Sources of Information Regarding Induced Seismicity," Sustainability, MDPI, vol. 12(6), pages 1-19, March.
    3. Apergis, Nicholas, 2019. "The impact of fracking activities on Oklahoma's housing prices: A panel cointegration analysis," Energy Policy, Elsevier, vol. 128(C), pages 94-101.
    4. John V. Winters & Zhengyu Cai & Karen Maguire & Shruti Sengupta, 2021. "Causal effects of the fracking boom on long‐term resident workers," Journal of Regional Science, Wiley Blackwell, vol. 61(2), pages 387-406, March.
    5. Stephan Heblich, 2019. "Ist Angst ein guter Ratgeber? [Fear is not a good advisor]," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 5(1), pages 89-94, November.
    6. Giuliano Masiero & Michael Santarossa, 2019. "Earthquakes, grants and public expenditure: how municipalities respond to natural disasters," IdEP Economic Papers 1901, USI Università della Svizzera italiana.
    7. Gibbons, Stephen & Heblich, Stephan & Timmins, Christopher, 2021. "Market tremors: Shale gas exploration, earthquakes, and their impact on house prices," Journal of Urban Economics, Elsevier, vol. 122(C).
    8. Nicholas Apergis & Sayantan Ghosh Dastidar & Ghulam Mustafa, 2021. "Fracking and Asset Prices: The Role of Health Indicators for House Prices Across Oklahoma’s Counties," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 154(2), pages 583-602, April.
    9. Rickman, Dan & Wang, Hongbo, 2020. "What goes up must come down? The recent economic cycles of the four most oil and gas dominated states in the US," Energy Economics, Elsevier, vol. 86(C).
    10. Roach, Travis, 2018. "Oklahoma earthquakes and the price of oil," Energy Policy, Elsevier, vol. 121(C), pages 365-373.
    11. Rickman, Dan S. & Wang, Hongbo, 2018. "What Goes Up Must Come Down? A Case Study of the Recent Oil and Gas Employment Cycle in Louisiana, North Dakota and Oklahoma," MPRA Paper 87252, University Library of Munich, Germany.

    More about this item

    Keywords

    Earthquakes; house prices; hedonic price analysis; wastewater disposal;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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