The local real estate market is feeling the effects of increasing interest in the mineral resources located deep beneath southeastern Ohio in the Utica shale formation.
Companies and workers looking to acquire mineral rights and drill in Washington and surrounding counties are seeking property to buy, lease and rent. And increased interest in purchasing land - and the rights to the minerals beneath it - is being met with a reluctance to part with property that owners think could continue increasing in value.
"We've had several people who had land listed, larger parcels, pull them off the market," said Nancy Arthur, owner/broker of Advantage Real Estate in Marietta.
Photo courtesy of Silverheels Property Management
Silverheels Property Management administrative assistant Jamie Olff stands outside the company’s Fort Harmar Townhouses off Alta Street on Harmar Hill in Marietta. Demand for rental properties like this is growing as more people come to the area as a result of interest in oil, natural gas and other minerals in the Utica shale formation.
Some are considering whether to sell their land but hold on to the mineral rights. With mineral leasing bonus payments reportedly reaching the $6,000 range in some neighboring counties, owners may fear missing out on a potential windfall.
"Probably there's more people looking for land than what there actually is" available, Arthur said.
There seems to be an even bigger deficit of sellers to buyers in Monroe County.
Q&A: 3rd-generation auctioneer sees changes
Ben Schafer is a third-generation auctioneer who's also been selling real estate for 16 years and owns some rental property. Although horizontal wells have been drilled in Noble County, most of the activity there still revolves around acquiring land, he says. As the value of land increases, the number of real estate purchases decreases as people look to get the most out of their property. The amount of property handled through the auction business Schafer runs with his father is down significantly.
Q: When did you first start seeing the impact of the oil and gas industry on properties?
A: There are people now starting to ask a lot more for the rentals. That's now just starting.
As far as speculation and people starting to hold out, that started last summer. We're about nine months in. There was a company that came in and was offering $50 an acre in March (2011, for mineral rights). And then about June or July it was in that about thousand to $1,500 range, and then it just grew exponentially from that. Now they're targeting specific areas where there are folks getting up to $6,000 an acre.
There's no land for sale. I think we've got one piece of bare ground for sale.
Q: And that's because people are holding on to it?
A: Yes. ... And if you do see ground for sale, for the most part they're going to reserve their mineral interest.
Q: What effect would that have on prices, if they're keeping the mineral rights?
A: I think it's too early to tell. ... But more or less, you'll be buying the surface rights. But if you take in the past mineral rights were leasing from $10 to $20 (and) $1,500 to $1,800 (was) an average selling price for bare ground, I think if you just sold surface rights, I think you're at that $2,000 to $3,000 an acre (range) so it's doubled, close to doubled the value just of surface area.
Q: What's been the impact on your business?
A: It's twofold, I guess. One, we don't have near the properties that we normally do available for sale. And by the same token, we probably have about 10 times the number of people out there wanting to buy something. ... So, basic supply and demand, the price goes up. You're out there basically turning over every stone trying to find someone to sell.
Q: What are the buyers looking for?
A: Anything. I think they're speculating right now. There's a ton of speculation right now, either by investors or people who maybe were planning to buy a home in a year or two (but want to buy) before the price is sky-high. If you have a home and the value is $125,000 on today's market, it's not inconceivable in two or three years for that house to be $250,000. But how do you replace it?
Q: Have rental rates in your area increased as a result of oil and gas exploration?
A: A little. And that is due to, the market's there, you could have probably raised them anyway before. But I think people now are starting to ask more because they know it's coming. ... We haven't raised ours. That's not to say we won't.
Evan Bevins conducted the interview.
"Nobody is selling anything," said Cathy Moore, who owns Swiss Lands Realty LLC in Woodsfield. "Because everybody's holding on to see if they're going to get big oil money and lease money.
"We've basically sold everything we have listed pretty much, and we're not getting anything new," she said.
Ben Schafer, owner of Ben Schafer Realty in Caldwell, said he's seen a decline in listings lately. With lease payments and land prices going up, he said he understands why some people are holding out.
"I can't in my right mind tell somebody that has a hundred-acre farm that now's a good time to sell," he said.
Moore said it's hard to quantify the effect mineral rights are having on property values, but she said sellers could easily get 25 percent more than they would have a year or two ago - if the mineral rights are part of the deal.
"It's really, really hard to say," she said. "But it would be whatever somebody was (willing) to pay for it, hopefully."
Arthur said there have been prices too high for some buyers in Washington County. A site in Little Hocking was priced for commercial use but a prospective buyer didn't want to pay that because they were only interested in what was under the ground, she said.
Rental properties are heavily in demand in some counties north of this area, where the shale exploration process is further along.
"I know in Guernsey County right now, and it's moving south, there are companies up there that now instead of listing homes for sale, they're listing furnished homes to rent," Schafer said. "For some of the nicer, executive-style homes ... they're listing $6,000 to $8,000 a month."
A Carroll County real estate company owner recently told The Marietta Times about rental rates tripling or more in some cases because of the demand there.
Moore said her company doesn't rent property, but they have seen increased interest in potential rental sites in Monroe County. A small house outside of Sardis that took several months to sell about five years ago didn't last long on the market when it was put up for sale recently.
"We had four offers on it in ... a day or two," she said.
Marietta-based Silverheels Property Management has had renters affiliated with the oil and gas industry "trickling in" for the last four months or so, said owner and management agent Brenda Hinton.
"We've rented several places out, from a high-end, single-family (unit) down to an efficiency apartment," she said.
The majority of the individuals have been involved in researching the title history on properties at the county courthouse. They've been looking to stay as little as six months and, in at least one case, as long as five years, Hinton said.
While Silverheels has about 300 private residential properties for rent in Washington County, Hinton said the positive outlook for oil and gas activity has them looking to expand.
"We'd love to take on more properties at this time because we see that we're going to need more as people move into the area," she said.
Silverheels also deals with commercial property and is working with a Colorado company that hopes to open an office in the area.
Other people coming to the area for shale-related work prefer to bring their own dwellings with them.
The Washington County Fairgrounds has played host in recent months to more than 20 RVs belonging to pipeline workers. In addition to giving the workers a place to stay, the arrangement has been beneficial to the fairgrounds, providing revenue to help offset the money lost when heavy rains forced the county fair to close a day early last year.
"I know everybody in the area's booked up," said Steve Tornes, fair board vice president. "They say between here and Reader, W.Va., (in Wetzel County) if there's a campsite, it's full."