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Gas drilling and home values

May 19, 2011

The proponents of gas drilling claim there will be economic benefits. The reality is different. In Pennsylvania, homes in close proximity to leased land have lost value up to 70%. Additionally, banks and the FHA won’t give mortgages to homes adjacent to gas drilling sites. Home- owner insurance also rises considerably because of the additional risks associated with drilling. The homeowner must be compensated for the economic losses he suffers by the people who lease their land for gas drilling.

Richard J. Kreznar
Callicoon Center, NY

Just not true

I don't know where to start. Leased bare land in Wayne County Pennsylvania is worth roughly $3000 per acre. Unleased land in Wayne County Pennsylvania is worth at least $6000 per acre and that does not include royalties. Any land value decrease has been a direct result of the economic collapse and the unwillingness of banks to loan money to anyone. This was arguably caused by our deficit which is in large part due to an unpaid oil war. If we had foregone this war and spent that money improving domestic infrastructure and gas production, there's no telling what land would be worth right now. But I digress. The fact is that gas drilling has had no negative impact on home values whatsoever and if anything have increased or stabilized land values as speculators buy up everything they can get their hands on especially in the Susquehanna river basin where drilling is actually allowed and encouraged. The statement that banks and the FHA won't give mortgages to homes adjacent to gas drilling sites is a bold faced lie that has been circulating in anti drilling propaganda. Furthermore, as demand for housing skyrockets when drilling commences, so too will the value of non lessor homes and rental units. So in reality, the non lessor should be compensating the lessor for increasing or stabilizing the value of their homes.

I'm sorry, but it's 100% accurate

The link below is but one fine example of the negative impact drilling has to property values. There are more examples, but wrap your brain around this one to start. This isn't propaganda, it's from an actual lender. Also, have you gone to a bank and spoken to a mortgage lender about this? Well, I have, and I've been told exactly the opposite of what you claim.

Read it over.

The document to which you refer tells us that appraisers are unable to determine the effect leases have on value. FHA loans are for the lower end of the market, which would indicate the values are low before any of this happens. The folks that buy the bulk of the property in this area do not qualify for FHA loans, and that is a good thing. Property and homes sell all over the place, many in areas with drilling. That indicates that the basic premise of this document does not hold water. They are not all cash buyers.

FHA backed mortgages

I imagine that most people know that "FHA loans" are not loans from the FHA, but as I understand it, mortgages that are backed, or insured, by the FHA. This enables more people of moderate means to afford, especially, the down payment, the percentage which, on an FHA backed loan, is much lower than a normal bank rate of 10% or higher. The FHA guarantees the mortgage, therefore the bank is willing to become the mortgagee.

The commenter to whom I am responding wrote: "FHA loans are for the lower end of the market, which would indicate the values are low before any of this happens". That is a wildly inaccurate statement. First of all, the FHA backed mortgages are possible to obtain, currently, up to $729,750. Anyone who thinks that to be a "lower end of the market", especially in our rural area, lives in an alternate reality.

Second, to paraphrase Gertrude Stein, a price is a price is a price, whether it is in relation to a modest home, or an expensive one. Both home values will be impacted by various factors to whatever percentage the market exists at a given moment in time. If $125,000 is in "the lower end of the market", it can still be impacted to the point of a 35% reduction, just as one with a former asking price of $700,000.

According to the National Association of Realtors, 56% of first time (entry level) buyers in the past year financed with an FHA backed loan. Another figure gathered in an internet search shows that during the first quarter of this year, 17.7% of all new loans were backed by the FHA program. This is no small potatoes, and if the FHA does not back loans due to certain drilling related issues, it would seem to have a very large impact upon the market, in that area.

As to whether home values have been negatively impacted by drilling, my opinion is there is no doubt, especially in areas that have experienced instances of water contamination, blowouts and extensive drilling. Forget about the actual houses that have become contaminated. There are multiple records on those facts. A house, or land, is virtually worthless without water.

As to the threat of drilling, how many houses have been on the market in Wayne County during the past two years, especially in areas surrounded by leased land? How many have sold, for how much, and how long did it take to sell the ones that did sell? This data would reflect information concerning only the threat of drilling, yet it would be informative. Who thinks that a beautiful house on two acres, surrounded by leased land, would not currently be negatively impacted? It is absolutely logical that the spectre of drilling would remove most of the second home community from the market. Who knows what impact actual drilling would do over the long term? Realtors in our area should weigh in on this question.

As for Dimock, as an example, how many homes would sell at what value in that nine square mile contaminated area?

Same goes for Bradford County. There was a very informative presentation by two farmers in Bradford that was circulating the internet today. It is on YouTube, and can be accessed at:

One of the many impacts they touch on is property values, and usage, on land that has been leased.

Now there you go again.

The FHA insures loans and does not guarantee them. The FHA requires at least 3.5% down payment. The loans are intended for low and moderate income families. Limits are based on area home values. In Gainesville Florida the limit is $271,050 while in Orlando, it is $353,750. In what area does the FHA have a limit of over $700,000? It would have to be some ritzy area!

Speak to local realtors and you will find most deal with buyers looking for second homes and vacation homes, and very few of those qualify for FHA home loans. National percentages for FHA loans are not exactly accurate in this area, as averages are just that. As far as how many houses have been on the market locally for a couple years or more and implying that it indicates that gas leasing is the reason; that is yet another example of voodoo math. You take a number and then insinuate, imply, or suggest that the reason for the number is drilling, leasing, or fracturing. You take a huge leap from the numbers given by various institutions to reach your interpretation of what it all means. That is where the voodoo part of the math enters the equation. Logic is not one of your strengths. What you claim is "Absolute logic" is an obvious fantasy.

What of all the homes not selling in Florida or Arizona over the past couple years? Does the lack of sales there prove drilling and/or leasing is killing sales? Or is immigration killing sales? Or could it be that we are in a really deep housing slump? You know nothing of home values in Bradford County and have again demonstrated that fact. Your guesses and assumptions hardly qualify as fact. You are trying to sell fear and we are just not buying.

insurance vs. guarantee?

The FHA mortgage limits, were set by the U.S. Congress, and they apply to the area known as "the United States", or most of it. Alaska and a few other areas have maximums that are higher.

The maximum is set at 115% of the area "median home price", up to a maximum amount of $729,750. The current republican controlled Congress wants to lower this amount to just over $625,000.

By the current maximums, any County in the U.S. that has a median home sale value of approximately $339,000, would be set at the maximum $729,750. I have no idea why the mysterious commenter mysteriously focused on Gainesville and Orlando, Fla, instead of Wayne County, but the median home sale value for Wayne is $129,000, and the maximum FHA backed mortgage is $271,050. The figures for any county in the U.S. can be found at:

I wrote that the requirements set by the FHA insured mortgages, especially relating to down payments, are much lower than the 10%, or 20% required by private banks. Yes, that requirement is 3.5%. Why does this mysterious commenter write as if I was wrong? Isn't a 3.5% down payment significantly lower than 10%, or 20%?

He disagrees with my use of the word "guarantee", but what is the purpose of the FHA insured mortgage? What is insurance? Why would a private bank become a mortgagee in a situation where the mortgagor does not meet the bank's requirements, except for the fact that the FHA is insuring the mortgage? Perhaps he would like to explain his disagreement?

He also wrote: "Speak to local realtors and you will find most deal with buyers looking for second homes and vacation homes, and very few of those qualify for FHA home loans." He needs to be specific. Do FHA backed loans apply to second homes, and vacation homes, or not? What does "very few" mean?
Don't a lot of people want to retire to Wayne County? It certainly impacts those potential buyers.

If, as he asserts, the vast majority of buyers that local realtors have as clients are "second home and vacation home" buyers, how could he think that shale gas extraction would not negatively impact the market? Our market is within 2-3 hours driving distance from one of the largest cities on the planet. He compares our market to...Arizona?

The upper Delaware River Basin is special protection waters, part of the National Park system, is designated "wild and scenic". Yes, I am of the opinion that our area has been negatively impacted by the potential shale gas extraction threat, and that it would be negatively impacted for many a long year until the "dust settles", especially if drilling occurs.

To transform such a rural, residential, nearly pristine area into a putrid industrial zone will create turmoil that will take many years to stabilize. The current home owners will be screwed, and they will not be happy. There will be very few, if any, "second home and vacation home" buyers.

I am expressing my opinion. I think it is logical. Unlike the mysterious commenter, I do not compare it to an "editorial", and I invite The River Reporter to investigate this issue. In my earlier comment, I invited local realtors to write, or speak out on this issue. I look forward to hearing from them.

Ah, Bradford County...take a look at that youtube link I provided earlier. Bradford County is still in its infancy regarding shale gas drilling. It is barely three years old. There are already plenty of homes with contaminated water. The worst is yet to come. Is it fear mongering to acknowledge events that are unfolding in front of one's very eyes? Let's talk plainly, instead of tossing tired insults. Where does Mr. Anonymous think he is posting, the Wayne Independent?

More voodoo math!

We need to look at the math presented by the DCS resident statistician and all around wizard. First he states, “The maximum is set at 115% of the area "median home price". Okay, let’s say we go along with that for this exercise. Then it gets interesting. He states that “By the current maximums, any County in the U.S. that has a median home sale value of approximately $339,000, would be set at the maximum $729,750”.

Now try to follow what we in the industry refer to as the “voodoo math” of Mr. Barth. If the first statement is correct that the max is 115% of the median, and the first part of the second assertion is that $339,000 is the median, how in all that is holy, did he come up with the $729,750 maximum?

If we multiply the given $339,000 by the 115% he has given us, we get $389,850, a very far cry from the $729,750 computed by using voodoo math. In fact, it is $339,900 short of the voodoo number.

Then we are told that the median in Wayne County is $129,000. With that median, he states the maximum would be $271,050! Once again, we are seeing voodoo math in use. Real math shows us that when we multiply $129,000 by the 115%, the maximum is $148,350. The difference between the real math solution and the voodoo math of the DCS statistician is $122,700!

Mr. Barth wonders why so many of us dismiss his thesis on the relationship of leasing, and voting and/or living in Damascus Township. Do not let this guy prepare your income tax return! The IRS does not accept voodoo math, although the DCS obviously does.

How ignorant, and yet arrogant, is TheNatural?

When one refers to a multiplier by 100%, one means that the cost or value of something has increased by a factor of 100%. In other words, the cost, or value, has doubled. What was $2, is now, $4.

Therefore, if the median home price is $129,000, and the FHA is allowed to insure to a factor of 115% greater than that amount, if one initially multiplies, as TheNatural did, he would come up with the figure of 148,350. Then, however, one should add the initial median price back into the equation, which would result in a figure of $277,350.

What TheNatural did was simply increase the median price by 15%, not 115%. Another way to calculate the increase, would have been to simply calculate $129,000 PLUS 115% = $277,350.

As I mentioned earlier, this seems to be the maximum increase that Congress had set, but that the FHA doesn't have to go up to that amount. For some reason, the FHA settled at $271,050, in the case of Wayne County.

Besides seemingly being arithmetically challenged, TheNatural didn't even bother to look up the HUD webpage I provided.

All 5 counties in NYC have the maximum allowance of $729,750, despite the median home price in New York County being listed as something like $588,000, if I remember correctly. Obviously, that maximum dollar limit kicks in way before the 115% figure in the case of NYC.

In any case, TheNatural should spend way less energy and time seeking to mock my intelligence, and spend way more time attempting to focus on truth.

To answer your question, or was that two questions?

Very and very. Now for your voodoo math. You state:

"When one refers to a multiplier by 100%, one means that the cost or value of something has increased by a factor of 100%. In other words, the cost, or value, has doubled. What was $2, is now, $4.'

Then you tell us:

"if the median home price is $129,000, and the FHA is allowed to insure to a factor of 115% greater than that amount, if one initially multiplies, as TheNatural did, he would come up with the figure of 148,350. Then, however, one should add the initial median price back into the equation, which would result in a figure of $277,350".

In your previous comment you stated:

"The maximum is set at 115% of the area "median home price".

You are both changing your story, and very wrong. You are, however, very good at voodoo math. The readers can determine the validity of your equations for themselves. It is that obvious. What do you believe 115% of $129,000 really is?

You are telling us that when the FHA states 115% of the median price, what they really mean is 215% of the median price? Why would they not simply state 215% of the median price, rather than expecting a person to know to use the newly coined and very imaginative "multiplier of 115%" and then "add the initial median price back into the equation"?

You are saying that a multiplier of 100% is really the same as a multiplier of 2? A multiplier is the number by which another number is multiplied. 100% times X is X, not 2X. It is well known that if a product is marked up 100%, the price has doubled. Did the FHA use that term? Did the FHA say to take the median price, mark it up 115%, and go from there?

Your failed attempt to squirm out of this huge blunder is exactly what was hoped. Your explanation of your math logic, which was suspected by virtue of the numbers used, was simply icing on the voodoo cake. It was just good to see you come into the light with your considerable voodoo math skills, and even explain your thought process. Imagine that as undeniably ignorant and arrogant as TheNatural is, his math is vastly superior to yours. How does that feel? (Now you have yet another reason to not use your real name in these comments!)

What a waste of time

I originally wrote: “The maximum is set at 115% of the area "median home price", up to a maximum amount of $729,750.” In retrospect, I can see how that is not stating what I meant to convey.

It should say 115% “above” the area median home price, instead of “of” the area median home price.

What a difference one word makes, especially when another is not bothering to absorb the rest of my comment, or even my next comment, after the rest of my comment, because my intent is cleared up when I wrote, “Therefore, if the median home price is $129,000, and the FHA is allowed to insure to a factor of 115% greater than that amount,…”.

I don't think a person writing in good faith would miss my point, or intent, especially when I gave sources for the information, and especially when the 115%, and the $729,750 figures were easily verifiable, and independently comprehended.

TheNatural is right, I should not be engaging anonymous writers of bad faith. It is demeaning, and a waste of time.

One cannot escape the irony.

Your point was not missed. It was simply wrong. The two facts that you actually had right originally were that under exisitng law, the FHA sets the loan limits at 115% of the median home price in a county, and in Wayne, the median is $129,000. Under new expanded limits, the limit is now set at 125% of the local median price. This is very complicated and the information seems contradictory. The rules of multiplication do not change and are very precise.

Remember that the FHA is trying to help low and middle income people with home ownership. That is why they use a median value for the area and set a limit of 115% of the median. If they loaned double the median and then added another 15% for the heck of it, they would be well above what most would consider middle income housing for that given area.

You do not add 115% of the median to the median. Your confusion may stem from the various "facts" we gather on the internet and even from banks. Decipher the following, posted 9-29-10:

"A few years ago, in an effort to revive the sluggish housing sector, Congress voted favorably for FHA, Fannie Mae and Freddie Mac to support home mortgages as high as $729,750 in high cost regions. The raised mortgage limits were significantly higher than the standard maximum loan amount of $417,000. The Wall Street Journal reported that without an extension on the higher FHA loan limits, that the $729,750 level would likely drop to $625,500 in 2011. However there may be another obstacle— FHA loan limits in even more counties could be reduced because of temporary extensions that enabled FHA to insure jumbo loans. There’s a nationwide ceiling for FHA loan limits, which is set at $271,050 and this is well below the $417,000 limit that is used for Freddie Mac and Fannie Mae.

WSJ noted that “most counties are somewhere between the floor and the ceiling, because 2011 FHA loan limits vary by region as they are targeted to meet local median home prices. Under existing law, those limits are set at 115% of the local median price; under the expanded loan limits that are currently in effect, the limits are set at 125% of the local median price. The current loan limits are also higher because they’re set using housing bubble-era median prices, which are significantly higher than today’s prices that would be used to recalculate the new loan limits. This means if Congress doesn’t again extend the higher limits, they’ll be starting from a much lower level next year, and the multiplier effect—115% versus 125%—will be lower, too. The FHA mortgage market continues to increase its market-share so clearly the consumer demand remains strong for FHA loan programs."

TheNatural contacted a local lending institution and asked what the FHA limit is in Wayne County and received a vague response saying it all varies and depends on many factors. Translated, that means who the hell knows! So keep in mind FHA loans are for low and middle income homes. The limit (as a rule of thumb)is somewhere between 115% to 125% of the median of the area. Wayne County's median is $129,000. (You had that right!) That would make the FHA backed loans in Wayne County as high as 125% of $129,000, or $161,250. Then we have all the fudge factors the government has created, so who the hell knows what the loan limit really is? It's better to light a single candle than to curse the darkness.

Yes, it is.

Fear mongering, that is. Glib statements like "the worst is yet to come" is a prime example. You can back peddle all you want. You can even keep insisting that home values have dropped because of leasing. Finally, you do admit it is merely your opinion and not fact. You are trying to sell fear and we are not buying.

Shale gas extraction will bring economic life to the area. Housing will be in demand and rentals will be in greater demand. You know that as one of your many fears was rising rents. If wages go up and rents go up, home values will go up. What is really hurting the area is the obstructionist movement, which you espouse. That hurts home values. Between your screaming that the sky is falling, and gas extraction stalling because of the DRBC, buyers and sellers have no idea what the hell is going to happen. Indecision, fear, and obstructionism are bad for the economy, as well as home values. Gas leases are not.


Looks like the natural just detonated your whole drilling ruins home values lie....... again. Last time we went through this particular scare tactic I challenged Perseusman to name one single real estate broker who would be willing to back the statement that home values have been negatively impacted by drilling and he was unable to do it because it is just a flat out lie. Next up: "The government doesn't know what's in fracturing fluid" lie. Or how about "it won't create any jobs" lie. Or maybe the classic "most people are against it" lie?

intelligent comment?

"home values lie..."
"scare tactic"
"flat out "lie""
"fracturing fluid "lie""
" "lie"".
"most people are against it "lie"".

Is this the Wayne Independent? Can a post get much lower than this? The entire post simply declares, no less than six times in five sentences, that I, along with others who oppose shale gas extraction in the Delaware River Basin, lie, and attempt to scare people.

This is a primary example of why TRR should require people to post under their real names. Otherwise, that post is the level that will engage on TRR's comments, and it will only be the anonymous who post.

Silence is Golden?

There are several anti drilling propaganda "fall back" inaccuracies that are constantly recycled and I declare them to be lies. And lies they shall remain until such time as you can prove them truths which we both know you just cannot. Claiming that drilling is negatively affecting home values is one such lie. You could very easily dispell this notion by posting the names of a licensed real estate broker and a bank loan officer who would be willing to declare that they believe that what you say on this matter is true. However no professional in either profession will be tied to such a false statement and you know it. Therefore the logical thing to do in your mind is have the dissenting opinion banned from this site. You shall have to do better than that, sir.

Science? Fact?

When does, when has, TheHick backed any opinion he has expressed with either peer reviewed science, or even reference to sources? Usually, his comments are simply meant to rile up, antagonize, or mock, his opposition.

His calling every position taken by those opposed to shale gas drilling, a "lie", or an attempt to spread "fear", is just a rote, meaningless device meant to trivialize any discussion, and demean his opposition.

He does this without any consequence to his character, because he hides, cowardly, and safely, in anonymity.

There is no discussion with either Natural, or Hick. Just look at these posts.

I still can't believe my eyes regarding the fact that TheNatural marked up the amounts by a factor of 15%, instead of 115%, and yet he takes every opportunity to mock my intelligence, my integrity, even my motivations. These people suffer no consequences for their words.

This is an embarrassing moment.

Wayne County median home price... $129,000

FHA loan limits.... 115% of median

115% of $129,000.... $148,350 loan limit in Wayne County

Watching Mr. Barth wrestle with simple math... priceless!

It is not TheNatural that causes your math and assumptions to be incorrect. Don't be angry at the messenger. Perhaps if you commented under an assumed name, like, maybe "Grey", this would all be less painful.

Remember that the FHA helps low and middle income home buyers secure financing. Doubling the mean home value and then adding 15% on top of that takes the property out of the low and middle income bracket. This is known as simple logic. (There is an opening you should not pursue!)


I see very little mocking or demeaning done in these pages by anyone other than yourself. I don't label my convenient opinions facts and then stumble when asked to prove them. Stating that home values are lowered by drilling is a lie that you are unable to prove a fact. My opinion is that it is a device to spread fear and undermine drilling.

Now then, getting back on topic. Can anyone find a real estate broker and/or loan officer who will sign off on the notion that drilling lowers home values? Still waiting.

Misguided and sticking to it!

With respect to Mr. Barth's comments: they are 100% accurate. I suggest you ask any local realtor, (but you won't),if they will list your home and/or property for the same amount they would have a few very short years ago. Yes, you can blame the economy as many of you do, yes you can blame rising gas prices as many of you do. However, leases "run with the land". The other factors have the potential to eventually self-correct. The lease is yours to keep while it eats away at your own values and those of the surrounding properties of people who did not sign. Only fools would hide behind endless arguments, bantering, suggestions of unfounded statements when the reality is that those who signed leases sunk our own local economy in ways they do not want to take responsibility for. Mr. Barth, I don't know how you do it. You have my deep respect. And, yes, in response to this, I'm sure the blathering will continue and none of the "Hicks", "Naturals", "Farmers", or whatever they consider themselves to be and their "tunnel visioned" like will ever pick up the phone or call an appraiser and substantiate the truths you offer. They don't want the truth, they want their lies to cover the truth. Again, I don't know how you do it. In the end, if and when drilling becomes a reality, and I hope to God it never does, they can look around and be proud of the devastation, the way they changed what was once regarded as a shining example of our success as true guardians of natural resources. I hope they sleep well knowing what it did to change the way of life we all enjoyed without crime from transients, money from outside interests, toxic sediments, and violated landscapes. They are misguided without the molecules or desire to absorb the facts and they are "sticking to it."

Go to Bradford County.

There is drilling there. House prices are up. Rentals are hard to find. Property values are up. You stupidly talk about values dropping the last few years. When TheNatural points out that they have dropped in Florida and Arizona where there is no drilling, Mr. Barth becomes confused. Why talk about other places? Because it shows that dropping values are not caused by drilling. Quite the opposite. Yes, we have spoken to realtors in this area and other areas. Actual gas drilling increases values. Sad to consider for the tunnel visioned obstructionists, but so very true. You lack facts but are long on fear.

The way of life here that you are so happy with is poverty and desperation. Schools have declining population. Young married couples are leaving. It all looks good to you simply because you do not interact with the reality that is Wayne County. You do not expect your children or grandchildren to live and work here. They will vacation here and some locals should be happy to get $10/hour to clean your bathroom and mow your yard. Yeah, you like things the way they are, but then you are not trying to make a living here and hoping your grandkids do the same.

The Horror, The Horror!

Transient crime, outside interest money, toxic sediments, violated landscapes, lions, tigers, and bears.....OH MY! So much dribble and not one single name. Give us the name of your realtor or bank loan officer who is willing to stand by the statement that drilling has lowered home values. One name. Come on, you can do it...... can't you? No? Didn't think so.