Homeowners beware: A new study reveals the BP oil spill will be toxic for real estate.
As if the real estate market wasn’t bad enough, a new study shows Gulf Coast residents could lose $3 billion in property values thanks to the BP oil spill.
The data comes from CoreLogic, a business analytical firm based in Santa Ana, Calif. The firm released a survey on Aug. 2, estimating the financial impact of the DeepWater Horizon oil spill on area real estate prices. Numbers are expected reach $648 million this year, and $3 billion within the coming five years.
Government estimates say that between 41 million and 120 million gallons of oil have spilled into the Gulf this summer from the BP oil spill.
Despite recent news BP finally capped the leak, any adverse changes or further oil drift around the Florida Keys and up the East Coast could hike potential Gulf Coast real estate losses to $28 billion over the next five years, CoreLogic says.
CoreLogic estimates there are 600,000 residential properties from the Gulf Coast in Mississippi to the East Coast of Florida, all within 1,000 meters of the coastline. Those properties are at the greatest risk for a significant loss in real estate value, the data reveals.
The worst-case scenario, which hasn’t happened yet, would be if coastal homes experienced a rash of beach closings, or if oil washed ashore near their homes (which actually happened in some coastal regions like Mobile, Ala.).
“While it is by no means a certainty that the major coastal communities along both coasts of Florida will be impacted at all by the oil spill, the lost amenity value in these markets could be particularly high," said Mark Fleming, chief economist with CoreLogic. “The total loss in amenity value in communities already being impacted by the oil spill to date is potentially as high as $3 billion over five years. Our hope is that the oil spill is contained and the loss in amenity value is further moderated by a speedy cleanup and a return of beach amenities to the affected communities’ homeowners.”
Highlights from CoreLogic’s study point to the dollar-by-dollar potential for losses along the Gulf Coast and along Florida’s east coast:
- Loss in amenity value increases for those properties closer to the beach. Beachfront homes could incur a loss of amenity valued as high as $80,000.
- Coastal communities along the Mississippi, Alabama and Florida panhandle include more than 71,000 residential homes at risk of losing beach amenities valued between $40,000 and $56,000. The total loss of beach amenities is valued at $3 billion.
- Of the immediately impacted communities, the largest overall loss in amenity value would be in Pensacola. Fla., at $1.6 billion, followed by Gulfport, Miss., at $1.2 billion.
- In terms of the average loss in amenity value per home, Gulfport, Miss., is largest at $56,000, followed by Mobile, Ala., at $45,000 and Pensacola, Fla., at $40,000.
- If the Gulf currents move oil to communities along Florida’s Gulf Coast, the loss in amenity value will rise substantially. Four communities — Panama City, Tampa Bay, Cape Coral and Naples — could experience a total loss in amenity value of $11 billion impacting 238,000 homes.
- Even though risks are low, CoreLogic also estimated possible loss in amenity value for communities along the Atlantic coast of Florida. This includes Miami, Key West, Palm Bay, Daytona Beach and Jacksonville. More than 295,000 properties within 1,000 meters of the beach could be affected with a total loss of $13.5 billion.
For now, the potential damage from BP’s DeepWater Horizon oil spill doesn’t fit the worst-case scenario model. Though BP isn’t offering money back on reduced land values near the oil spill, experts say it’s still too early to know the total extent of the damage.
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