The Real Estate Bloggers

Oil Spill Impact On Gulf Real Estate Still Being Felt

Posted: 19 Aug 2010 04:37 AM PDT

Oilrig The folks who have housing on the Gulf of Mexico are still facing a hard time from the oil spill of this summer. Sure the well is capped, but the perception of Gulf property has been damaged and it will take a long time for the perception to change.

For housing to rebound there has to be enough confidence that the oil will not return for tourists to return to the Gulf Beaches in the numbers that had in the past and for the fishing and oil industries to to come back to their previous levels.

The housing markets have been hit at both ends. The blue collar fisherman and oil workers have been out of work for a long time. Sure, BP is compensating many of them, but that does not mean they have a job and are looking to invest in housing. The low end of the housing market in the Gulf region has been huge.

Add to that the top end beach rental market was devastated this summer and you have the makings of a crisis. The weak housing market, especially in Florida, has not been in a position to weather another downturn. Experts are predicting housing prices to drop another 10 percent because of the spill. That can not be absorbed easily.

Studies on the effect of the Gulf oil spill on housing in the area show:

•The impact of the spill on home values in communities already affected by the spill is expected to range from $648 million over one year to as much as $3 billion over five years, according to an Aug. 2 report by CoreLogic. Of the immediately affected areas, the largest overall loss in value would be in Pensacola ($1.6 billion), followed by Gulfport, Miss. ($1.2 billion).

“The guy who is renting is going to see an immediate loss,” says Mark Fleming, chief economist at CoreLogic. “If I’ve lost this value, do I have some right to compensation?”

•Housing prices are likely to fall 10% in total along the 569-mile coastline, where there are about 14,396 acres affected by the spill, according to CoStar Group, a commercial real estate analysis firm in Bethesda, Md. Assuming that the developed beachfront property has a present value of $3 million an acre and the value drops 10%, that would come to $4.32 billion of land value lost because of the spill.

•In Florida, the state is the least able to bounce back from another real estate setback. Some coastal areas in Florida are being affected by the spill. According to a Fitch Ratings report, Florida already ranks the worst among all states in mortgage delinquencies across all product types. Further economic stress brought on by the oil spill and declines in the tourism and fishing industries are likely to increase default rates.

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Oil Spill Impact On Gulf Real Estate Still Being Felt