By Mike Colpitts
Gulf coast homes and condos on the immediate coastline in the path of the BP oil spill in Alabama and Florida will suffer only a 10% drop in average values as a result of the oil disaster, according to a new Housing Predictor forecast compiled after more than three months of research.
The impact of the disaster has already taken a toll on Louisiana and Mississippi coastal properties, gaining momentum as real estate brokers and agents close few sales due to the oil spill. Coastal properties in Louisiana and Mississippi are projected to sustain a 20% loss in average values as a result of the spill, down-graded from 30% initially forecast.
The 10% deflation in housing values along Florida and Alabama’s coastlines is less than what many real estate economists feared would develop as a result of the spill.
The losses in home and condo values for the region are projected to be sustained over a two year period as buyers shy away from the area in fall-out of the environmental catastrophe, the worst in U.S. history. Real estate agents all along the gulf coast, from Louisiana through the Florida panhandle report little sales activity as buyers await the outcome of the crisis.
The unprecedented U.S. environmental disaster poses a series of problems for the Gulf Coast region, including the loss of millions of jobs as a result of the disaster with declining tourism. Hotel and condo reservations are down more than two-thirds along the popular Alabama coastline, where oil has stained the beaches in Gulf Shores, adding to a public relations nightmare for real estate sales people.
The crisis is impacting every sector of the real estate market, including banks, title companies, real estate brokers and rental agents, who are all typically paid on commission.
Florida and Alabama have started aggressive TV advertising campaigns to counter the negative media coverage over the crisis at the height of the tourism season. The annual $60-billion Florida tourism business hangs in the balance. An estimated $14 billion of the states tourism business is counted in receipts that are spent near Florida’s panhandle beaches.
Florida housing values, troubled by high unemployment and record foreclosure rates were on a slow but steady route to recovery before the spill along the gulf coast. But the oil spill scared off buyers, who see the area as an environmental disaster. Not all panhandle beaches have been impacted by oil staining its beaches. The oil has mainly been kept off shore by seasonal gulf winds blowing the massive spill towards Louisiana and western Mississippi. Only globs of oil or tar balls have washed ashore in Florida.
Still, as a result of the spill and its uncertainty in terms of damaging the environment has made buyers reluctant to look at property. The fears also include questions over the use of the dispersants BP oil has used to break up the oil and its long term health effects.
Nearly 60% of Florida properties with a mortgage are in default as an increasing number of condominium and vacation homeowners run into trouble making mortgage payments as a result of losing weekly rental income due to the spill.
Freddie Mac, one of the nation’s two giant mortgage lenders, Bank of America and Wells Fargo Bank are granting mortgage borrowers in the region relief. Freddie Mac is allowing its servicers to suspend a borrower’s mortgage payments for up to 12 months.