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How much do local disasters disrupt the market?

IRVINE, Calif. – April 6, 2016 – Will a homebuyer consider a listing if a sinkhole opened up two streets over a few days ago? If the neighborhood had to evacuate recently because of a gas leak, will it impact housing sales? And if it does, how long will that impact hold?
RealtyTrac attempted to answer some of those questions by analyzing the local housing market in Porter Ranch, Calif., after an unprecedented gas leak. It 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, 4 percent – worth an estimated $1.3 trillion in total market value – are within a 10-mile radius of an underground natural gas storage facility like the one that leaked in Porter Ranch, RealtyTrac says.
Impact on the Porter Ranch real estate market following the gas leak
1. Home sales decreased 44 percent in the Porter Ranch zip code in the three months following the discovery of the gas leak – more than two and a half times the seasonal drop in home sales in Los Angeles County and statewide in California during the same time period.
2. The share of all-cash sales in Porter Ranch increased 50 percent in the three months following the discovery of the gas leak – five times the seasonal uptick in the share of cash sales in Los Angeles County and about four times the seasonal uptick statewide and nationwide.
3. Median prices held steady in Porter Ranch despite the drop in sales and jump in cash buyer share.
“Such a spike in the percentage of cash sales in an area in such a short period of time certainly indicates a market disruption,” says 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.”
Lipscomb says that further research might reveal that buyers found it harder to get a mortgage because “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,” says 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.”
© 2016 Florida Realtors®  
Source: Florida Realtors Feed

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