Fracking and the Housing Market: A Texas Case Study

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Broeksmit, Henry M.
Jackson, Samuel P.
Shill, Robert D.
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Scholarship Sewanee 2020 , Fracking in Texas , Oil and gas production , Effect on local housing market , Local home values , Permian Basin
The Permian Basin is one of the most significant oil and natural gas production basins in the world. With a surge in production in the last decade, the economic impact of oil and gas development in the basin has prompted an examination into local economies. For the purpose of this paper, we acknowledge the broader economic impact of oil and gas development in this region, but focus on the effect on the local housing markets. This paper provides evidence of the distributional effects of hydraulic fracking, a oil and gas production method, by analyzing variables of the United States fracking revolution on the housing markets of West Texas, specifically in and near Midland and Odessa. We utilize a difference-in-difference framework to analyze the true impact of fracking on local home values, using housing data from Abilene and Amarillo as our control groups for the study. Both of these cities are similar in size and geographic location, and they do not have any significant oil production, making them ideal candidates for our model. We find that, on average, compared to prior to the fracking boom, home values in the Midland and Odessa increased by $37,423.72. Fracking has had a notable effect on the appreciation of home values in the Permian Basin, which we attribute to increases in income and housing demand brought about by the energy boom in West Texas.