Earthquakes and House Prices: Evidence from Oklahoma

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.