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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Adding the gulf oil spill is another factor to what was already a volatile housing market. I'm not sure if or when these residents will ever be whole again.
I sure hope the Gulf Coast does not get affected as indicated in this blog post. The key word in this article is “Perception.” We don’t truly know what the reality is going to be with regards to the ongoing affects of the oil spill, but a lot of people have already formed their perception of what it is going to do, which unfortunately will most likely become reality!
We must do our best to keep a positive outlook, combat as much negative media and sentiment on this as we can, and keep selling the benefits of living on the beautiful Gulf Coast.
Agree with above perception is a huge deal when it comes to how volatile the market is. Just as it is with stocks it is all about consumer confidence.
I truly hope that it isn't as bad as this article says, but who knows now a days. We are experiencing more crunches in my local area as another big factory is shutting down, sure to drive more foreclosures and homes prices down. Which means it is a BUYERS market!
Consumer confidence is what drives the market, the more confident people are the more the prices will rise. If they have stuck it out and continue to purchase prices will stay on the rise, but with a big deal like this it is sure to waiver the strong of wills.
Lets hope this is not the case for this community.
It's a shame because I know if I were considering purchasing a home down there right now, I might take a wait-and-see approach until the full effects of the spill become clear. All of those dispersants sent the oil to the ocean floor. Now we see whether the stuff just sinks into the ocean floor, or gets washed up on shore over the next several years.
I would think by March or April, if nothing else washes up on shore, the market will be back to "normal." At least, the spill won't be affecting the values anymore.
I agree with Ms. Eleana…the Gulf will never be the same. On top an already struggling US real estate market, the spill is a major blow to the Gulf–like a swift kick when you're already down.
I hope the region can recover…but $4B of lost value + down markets…ouch…makes it seem a really long way back.
Keith Smith
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SmartVestorsRealty
Sounds bad, but to some degree, isn't this expected? Almost any location as desirable as the Gulf Coast will be desirable for a reason, probably weather and views. Isn't there also a downside to most of these locations, such as hurricanes and flooding that haven't been priced into the market for some reason? Whether man made, or natural, people seem to over-react, prices will drop, and then the next wave of investors will come in, and buy the "under-valued" land. It's the cycle of boom and bust and the oil spill seems to be the impetus this time out. Short term, it's a horrible situation to live through, but I don't see it as being too different from the hurricanes that wiped out parts of Florida a few years back.