The Times Dishes More Dirt on Natural Gas
The New York Times is, yet again, dishing the dirt on natural gas, this time on the prices of the dirt itself, that being Catskills area real estate, the prices of which the Times suggests are being negatively affected by the prospects of natural gas development. They couldn’t be more wrong.
A new hit piece on the natural gas industry appeared in the New York Times real estate section Thursday. It alleges prospective second-home buyers fear natural gas development “will not only ruin the natural environment but also depress property values” and thus are avoiding inking deals. It makes this claim based on anecdotal evidence, comments from individuals such as Jennifer Canfield who are anything but neutral and a highly selective parsing of what little hard data is offered. It follows the new New York Times template, in other words.
The facts in the story and from other easily obtainable sources tell a much different story. The natural gas industry has positively affected real estate values in counties where development is most likely to occur in New York State, following the same pattern exhibited across the border in Pennsylvania.
Let me begin by noting this a subject on which I have spent a good deal of time over the last two decades. I have conducted real estate market studies for developers, private communities, towns, counties, the State of New York and the federal government. I have conducted several such studies with respect to properties in Sullivan County, New York, which gets much of the focus of the Times article. That article is both superficial and deeply flawed. It matches none of the facts on the ground, if the reader will pardon the pun.
There was but a single objective fact presented throughout the entire story and it consistent of this:
The New York State Association of Realtors says that residential sales across the state were up 6.7 percent in the second quarter. But in Sullivan County, a second-home destination that sits on the Marcellus Shale, sales were down 4 percent.
The Times provides a link to the State Association of Realtors, but, interestingly, didn’t point to the actual data, which is available here. Perhaps there is a reason. The data includes the following gems:
√ Sales for Delaware County, site of the Hancock property featured in the article’s leadoff photograph, were up 20.9 percent and the median sales price was up 5.8 percent. Moreover, it had a higher proportion of second homes in 2010 (29.7 percent) than Sullivan (29.2 percent).
√ Moving west through the developable Marcellus Shale region of the Southern Tier, sales were up 6.4 percent in Broome County, 8.8 percent in Chenango County, 9.2 percent in Tioga County, 9.8 percent in Chemung and 10.4 percent in Steuben. The average for all counties, including Sullivan, was 7.0 percent, slightly above the statewide figure.
√ The New York State Department of Environmental Conservation states there were 6,732 producing natural gas wells in New York in 2010, approximately half of which (3,358) were in Chautauqua County most of which have been hydraulically fractured. It also had 7,753 second homes in 2010 according to the U.S. Census. Yet, the realtors’ data indicates its sales increased 15.9 percent for the second quarter year-to-year and the median sales price was up 9.6 percent.
√ Greene County, much more typical of the Catskills tourist region than Sullivan, also has an abundance of second homes (23.2 percent of all housing) but no developable Marcellus Shale and zero leasing activity. Its sales were down 21.8 percent, considerably worse than Sullivan.
So, even the Times‘ one piece of solid evidence turns out to be a lot less than it appears. There is, in fact, far more evidence in the Times‘ source for the conclusion natural gas has a beneficial impact on property values, especially in counties with large numbers of second homes.
The realtors’ data is selective. It doesn’t represent all sales, includes none from 18 counties and very few sales from others. A more complete list of sales is available through the New York State Office of Real Property Services. It also breaks the data down by municipality. There are only a handful of towns in Sullivan County within any economically recoverable Marcellus Shale. These are Bethel, Callicoon, Cochecton, Delaware and Fremont. I compared second quarter sales for 2011 and 2012 for these municipalities and found the following:
√ There were 32 sales of single-family homes, seasonal residences and other improved residential properties for the second quarter of 2012, compared to 29 for the same period in 2011. This represents a 10.3 percent increase, well above the figures cited by the Times for either Sullivan County or New York State as awhile.
√ The average selling price for a one-family residence in these municipalities rose from $168,093 in 2011 to $168,363 in 2012.
√ The number of out-of-county (almost all metro) buyers rose from 17 to 20 for the quarter, year-to-year, a gain of 17.6%. New York City buyers of land in these five towns jumped from 8 to 11, a 37.5% increase.
This data indicates any declines of real estate activity or values in Sullivan County were outside the potentially productive Marcellus Shale area of Sullivan County. This is no surprise, as the five towns account for only 262.9 square miles of land area or 26.4 percent of the county. The bulk of the county’s land (75.6%) and housing units (80.1%) are in areas where there is absolutely no prospect of Marcellus Shale development.
There are also numerous reasons real estate activity is soft in those areas without Marcellus Shale development prospects. Sullivan County’s problems began long before natural gas development was a gleam in anyone’s eyes. The slow collapse of its major hotel resort industry over several decades left it with a 16.6% poverty rate, compared to 14.2% statewide and 13.8% nationally. It ranks 61st of 62 New York State counties in health outcomes, dead last in premature death, 58th in morbidity, 54th in health behaviors, 48th in clinical care and 59th in social and economic factors. Who needs enemies with rankings like these?
Those natural gas jobs would surely help the situation, but right now the prospects for moving to Sullivan County to earn a livelihood or raise a family aren’t so great, are they? Unless, of course, you happen to be in that portion of the county where there is a possibility of real economic development because Marcellus Shale lies beneath it.
The Times citation of Sullivan County as an example to support its contentions is nothing less than puzzling considering all this, but what about the rest of its arguments? Anecdotal though they may be, do they have any validity? Well, let’s look at that property featured in the photograph employed in the article. The property is described as follows by the Times:
In a secluded spot here lies a vacationer’s dream: a three-bedroom ranch-style house with 14 acres of woods roamed by deer and turkey, just minutes from prime trout fishing on the Delaware River. The asking price is $107,000.
But even at this “just reduced” bargain price, said Leonard Piorkowski, a local real estate agent, he can’t make a sale. “One hundred seven thousand for 14 acres and a house and two garages, and we can’t sell it?” Mr. Piorkowski lamented as he guided a visitor across the property recently.
Later on in the story we are also told the property has a gas lease. We are not told, however, whether the mineral rights that would offer the possibility of future royalties from natural gas development, are being sold with the property or retained by the current owner. One would think this is a rather essential piece of information in a story focusing on the impact of such development on real estate activity, but it’s apparently irrelevant to the Times. The newspaper’s description of the property also takes poetic license to a whole new level. Here’s what the listing for the property actually says (emphasis added):
Located on a quiet low traffic side road in the wonderfully scenic French Woods, 13.5 + acre grounds are a mix of gently rolling pretty forest, with a greenery encompassed private clearing surrounded by own private woodlands. Older manufactured home has been well cared and extensively added upon to total 6 rooms, 3 baths, and 1 1/2 baths. Over the last several years there has been significant updating to this extremely comfortable absolutely private hideaway. There is a deck surround above ground pool attached off rear, a detached 2 car garage w/ electric over 15′ x 30′ concrete pad, numerous updates in the residence’s kitchen, recently updated plumbing, updated master bath, decks, and oil FHA heating. Wildlife is more than plentiful with the yard over run with deer and other assorted area game. A quiet all year round residence for weekends or as ones primary residence.
The listing also notes this remodeled manufactured home, described by the Times as a “ranch style house” was erected in the 1970’s and is a mere 1,001 square feet in size. Assuming a parcel of this size and type in Delaware County might be worth $2,000 per acre (a study I completed two months ago for a government agency indicates $1,700 per acre is more likely), this would mean the owner has set an effective asking price of roughly $80,000 or $80 per square foot on what is, when all’s said and done, still a remodeled manufactured home parcel that may or may not have mineral rights. Applying the same methodology, one could buy this 1,900 square feet home, listed by the same realtor in the same general area, for $74 per square feet, so perhaps there are other reasons the property featured by the Times hasn’t sold yet.
We also know real estate activity and values in other areas where natural gas development is taking place fail to support the Times suppositions. Another study of the real estate market in Pennsylvania, just completed by my firm, found values in the Northern Tier region stretching from Lycoming to Susquehanna Counties, where most development is occurring in the Commonwealth, were up significantly in most cases. Cropland averaged $6,200/acre in 2012 vs. $5,800/acre in 2011 and $4,500/acre in 2010. Pasture averaged $6,700/acre in 2012 vs. $5,000/acre in 2011 vs. $3,700/acre in 2010. Forest values averaged $4,500/acre in 2012, the same as 2011 but up significantly from the $3,500/acre in 2010. There are very few properties producing those kinds of numbers in Sullivan County or anywhere along New York’s Southern Tier, yet.
Home prices are also up in these counties. Trulia.com provides an analysis of listing prices by county and it shows the following:
Notice the Northern Tier counties of Tioga, Bradford and Susquehanna are among those areas of the Commonwealth with the highest listing prices. Wayne County, right across the Delaware River from Sullivan County, New York is in the top category. How can this be, when both are part of the same general market and have identical natural gas development prospects, given they are both in the Delaware River Basin Commission area where regulations have yet to be adopted? Once again, it doesn’t appear the Times did its homework or even asked the correct questions.
Then again, maybe it’s all a self-fulfilling prophecy. If you’re a second home owner who talks down natural gas based on your NIMBY perspective and the untruths peddled by anti-growth special interests, perhaps it does penetrate the minds of like-minded folks to whom you try to sell your home. It could be, I suppose, although the evidence strongly suggests otherwise. If it is true, a good friend observes, perhaps they’ve hoisted themselves on their own petard. That would move us from the poetic license of the Times to poetic justice, wouldn’t it?