How Murder Can Drop an Entire Neighborhood’s Home Values

The condo where Nicole Brown Simpson was murdered in 1994 saw a significant reduction in value after the killings. (Photo: AP)

A murder inside a home can destroy that home’s value: Nicole Simpson Brown’s condo sold for $200,000 less than market value; JonBenet Ramsey house in Boulder was on the market recently for two years before being removed at a price point almost a million less than comparable homes in the area. Even murders without the national headlines can see their values drop by a hundreds of thousands of dollars.

But a new study says that even homes within a four block radius can lose tens of thousands in value for up to a year after the tragedy.

According to the consumer comparison website finder.com, the U.S. home market loses an estimated $2.3 billion a year due to homicide. California loses more than any other state: $566.7 million. That translates to a potential drop in value of $18,973 for any home within a 0.2-mile radius, or about four blocks, of a murder.

“Murder does affect home prices,” Fred Schebesta, co-founder and director of finder.com, tells Yahoo Real Estate about finder.com’s somewhat morbid study.“People experience psychological distress, people think there’s a higher crime rate and a lower degree of safety and security [when there’s a murder nearby]. And the area becomes a little less desirable to live in.”

According to stigmatized property expert Randall Bell, homes sold shortly after the murder are typically going to sell for less than market value, taking a hit of 15 to 25 percent in the three years after–though there is not hard and fast rule.

But finder.com’s research goes beyond just the house where the murder took place and tries to see if there’s a widespread drop in prices surrounding a homocide. The sites researchers started with data from the University of Technology Sydney that found property prices tend to fall around 4.4 percent within a 0.2-mile radius of a homicide location.

That means if a $600,000 home is too near a murder scene, it could lose up to $26,400 of its value for up to a year after the tragedy.

Finder.com researchers then took that research and applied it to the U.S. housing market, looking at each state’s 2014 median home value and murder tally. They then took into account each state’s average housing density, assuming that the more people packed within that .2-mile radius of a homicide, the bigger the impact on housing prices will be.

Crunching those numbers, they were able to determine how each state’s home values are affected by homicide.

So why does California take such a big hit?Two reasons, according to Schebesta.

“The median home value is very high in California. And there’s a lot of homicides. The housing density isn’t as high compared to some other states, but those two factors — home value and number of homicides — really drove up its market loss,” he says.

New Jersey came in second place, losing $406.9 million in housing market value due to murder.

"The home values are sort of midway, the homicides are on the lowish side, but the density is very high,” Schebesta says of New Jersey, America’s most densely populated state. “That’s what put New Jersey in second.”

New York, which has more homicides than New Jersey but is less densely populated, came in third place with an estimated market loss of $234 million.

Which state lost the least amount due to homicide?

Alabama; finder.com says its market loss due to murder was a paltry $45,900 as an entire state.

(The home of Brian Betts, a D.C.-area principal who was murdered in 2010. Two others were murdered in the same home in 2002. The address was later changed to avoid connection to the deaths. Photo: The Washington Post)

While the full weight of a murder obviously isn’t about property values, that doesn’t mean buyers down the road don’t feel it. The stigma of a murder house can be an issue for some homebuyers, many of whom are squeamish about buying a home with or even near such a dark history.

In certain states, disclosure laws require that prospective buyers be told if a murder, suicide or other such calamity has occurred at a property.

Stigmatized property rules could help explain why California took the biggest home value hit in finder.com’s murder study. The state requires disclosure of any death that occurred on a property within the past three years.

In contrast, Alabama — whose home values, according to finder.com, were least affected by murders — happens to be one of the states without such a stigmatized property disclosure law. If you buy a house there, it’s up to you to find out if someone was killed there (one way to do that: sites like DiedinHouse.com where, for a small fee, you can enter a U.S. address and find out if anyone has died there).

But there may be a slightly morbid silver lining for real estate investors and homeowners willing to hang onto the properties. For one, the downward effect homicides have on home values are temporary; even Nicole Simpson’s house, according to Zillow, has tripled in value since those lean years after the murders (it also underwent extensive remodeling and a change of address).

“Property prices tend to go up over time,” Schebesta says, even in so-called murder houses. “So there’s potentially an opportunity for a smart investor to come in and buy a property that’s undervalued in an area where there has been a homicide or something like that and snap up a bit of a bargain.”

More morbid real estate stories on Yahoo Real Estate:

• Wife Lists ‘Utterly Crap’ Camper Suitable for ‘Sordid Affairs’ and 'Murdering’ on eBay
• Who Died in Your Home? Website Gives the Gory Details
• American Horror Story: The Creeptastic Hotel and Its Real-Life Inspirations (28 photos)
• Burglary Suspect, 19, Burns Alive in Chimney of Unsuspecting Homeowner