When Gas Leaks Plague Your Neighborhood, What Happens to Home Values?

gasAfter a fatal home explosion three weeks ago that left one family burying their daughter and two neighborhoods reeling from the shock that the problem has been an ongoing one, the immediate concern was about safety.

But now, a little more than a week into the massive, 2,800-customer gas service shutdown in Midway Hollow and the Love Field community, people who had been planning on selling homes in the area have begun wondering — what will this do to property values?

As the investigation into the home explosion that killed Michellita Rogers reveals that gas leaks had been plaguing the area around her home for quite some time, and as Atmos Energy began replacing 50 and 60-year-old steel pipe with state-of-the-art new poly pipe, worries about the notoriety of the neighborhoods as the epicenter of a hazardous situation grew to a fever pitch.

And that hot market that causes homes in Midway Hollow to sell within days was — until recently — beginning to trickle over across Marsh Lane, which caused a few homeowners who had planned to put homes on the market this Spring to worry about that plan.

And it’s not an unusual worry. After a similar May 2017 explosion in Firestone, Colorado, neighbors said that in addition to safety concerns, a potential downturn in home values also worried them.

There isn’t a ton of definitive literature that talks about what home values look like after a home explosion or gas explosion in a neighborhood. One study of environmental incidents and home values showed that many discussions about potential home value dips depended on flawed data — and much of the study centered on petroleum pipeline, not natural gas.

In other words, it’s not an easy yes-or-no answer. We reached out to John Baen, a professor of real estate at the University of North Texas College of Business for his thoughts. Baen is also an appraiser, broker, and an academic researcher as well.

Baen said that the impact to home values depends on how far the “stigma and fear” is perpetuated as the investigation into the incident goes on, and as more leaks are uncovered. “It could seriously impact the area’s marketability, even after things are ‘fixed’ with a new main line,” he said.

The biggest issue, Baen said, is the uncertainty surrounding the situation — only exacerbated by the year-or-more wait for the National Transportation Safety Board’s official report and verdict.

“The unknown is not good for long-term home investments,” he said. “Lender and buyer inspections will also be MUCH pickier than normal in the future, too.”

How quickly Atmos Energy settles any lawsuits will also factor in. “A class action lawsuit that will mention or include every home in the area outlined will cause years of delays and confusion in selling and buying homes in these areas,” he said.

But the area will recover, Baen said. “The markets always overreact to bad news for a while before getting back to normal,” he said.

Nathan Draper is a builder and Realtor in Midway Hollow, and also lives there with his family. He said he is hopeful that the massive improvements to the area’s pipeline will actually make buyers feel safer.

“It shouldn’t hurt — it could even help — values knowing our area will have an improved infrastructure compared to surrounding areas that are just as old and unimproved,” he said.

Draper said he thinks there might be a brief slowdown as Atmos and the city get the neighborhood put back together, but that as the natural gas provider’s trucks begin rolling out of the area, sales will rebound.

“I think in ‘three months or so,’ according to Atmos, this will be resolved and they will begin working on other areas in town with less pending emergency issues,” Draper said. “They too will have the same brief inconvenience.”

Steve Goff, broker/owner of Ceda Realty and a Champions School of Real Estate instructor, agreed.

“Events like these do disrupt the sale of real estate and certainly affect home values in the short-term,” he said. “In the long-term, we typically find that events like these do not majorly impact real estate values, as thorough, corrective action usually follows these situations.”

“Buyers appreciate the fact that recent improvements will have strengthened the safety of the neighborhood,” he added.

“I think the buyers will understand this will be resolved in short order and we’ll be left with something better than we started with,” Draper agreed.