The BP oil spill’s impact on home values in 15 coastal counties along the Gulf of Mexico could total $3 billion over five years, according to report released today by business information company CoreLogic.
An additional $28 billion loss in values could also occur in the unlikely event that oil reaches communities around the Florida Keys and up the Atlantic coast, the report said.
The report analyzed the spill’s potential effect on home values in one Alabama county (Mobile); one Mississippi county (Harrison); and 13 Florida counties (Bay, Brevard, Broward, Collier, Duval, Escambia, Hillsborough, Lee, Miami-Dade, Monroe, Palm Beach, Pinellas, and Volusia).
Specifically, CoreLogic measured the spill’s impact on properties’ economic value associated with beach access, which the company refers to as "beach amenity value."
"Using well established economic techniques for the measurement of the economic value of environmental amenities, an estimate of the loss in beach amenity value is substantial," said Mark Fleming, chief economist with CoreLogic, in a statement.
"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.
"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."
The company examined counties that are at risk of oil coming ashore and the closure of beaches to human recreation for a five-year period. Formerly part of The First American Corp., CoreLogic maintains large databases of information for real estate transactions and mortgages, and offers a range of consumer, financial, and property information to businesses and government.
"Buyers of homes in these coastal communities paid premiums when they purchased their homes for access to the beaches and the amenity benefits that they represent," the report said.
The report is based on public record and parcel data, as well as CoreLogic’s geospatial coastline data. In the 15 at-risk counties examined, the company identified more than 600,000 properties within 1,000 meters of the coast that could be affected.
"The approach, used in this analysis, to the valuation of environmental amenities was developed in the late 1970s and early 1980s and is a well-accepted technique for measuring the value that consumers place on a variety of different environmental and residential amenities," the report said.
To obtain the five-year estimate, the company took their one-year loss estimate, $648 million, and multiplied it by five. The one-year estimate is based on the annuity value of the perpetuity value of access to the beach, measured in distance. The closer to the coast, the greater the impact on value. Beachfront homes could incur a loss of up to $80,000 each, the report said.
Average estimated losses in the three coastal communities most affected by the spill — Harrison, Mobile, and Escambia counties — range from an average of $39,882 to $56,469.
If oil sullies the beaches of Florida’s Gulf Coast communities of Panama City, Tampa Bay, Cape Coral, and Naples, the impact could be felt by 238,000 homes, reaching a total loss of $11 billion. Some of these areas have already been hit hard by high numbers of foreclosure properties.
"In addition to the loss estimates of the economic value of beach access, the already fragile housing markets in many of these communities are likely to experience further distress due to the potential impacts of the oil spill on local economies," the report said.
Sales in Panama City and Cape Coral were down 9 percent and 12 percent year-over-year, respectively, in June. Tampa saw sales rise 13 percent.
Kaiser Realty, a brokerage that specializes in vacation rentals in Gulf Shores and Orange Beach, Ala., saw its year-over-year occupancy numbers drop 33 percent in June and 45 percent in July. It expects business to drop further in August as the school year starts up again, that company reported.
"Revenues during the 10-12 week window we are finishing now are what sustain the businesses in a small tourism market like ours throughout the year. We have several who have already gone out of business, and anticipate more. Kaiser Realty will survive but this will always be remembered as one of our most trying years in our now 30-year history," said Emily Gonzalez, the brokerage’s marketing director.
Some real estate professionals on the ground did not agree with the report’s findings, however.
"I believe their estimates are grossly incorrect. First, the cleanup is still in progress and (some) commercial fishing areas are already opening back up. The effects of the spill (appear to be) diminishing every day. Less oil is reaching the shoreline. BP is already reducing its fleet of responders," said Sterling Joe Ory, president of the New Orleans Metropolitan Association of Realtors.
Though the report did not cover Louisiana beaches, the impact in other states was less dramatic, he said.
"Though (coastal) Louisiana is mostly marshland, the other states are bordered with beaches, which makes the cleanup infinitely easier. Real estate doesn’t have that knee-jerk volatility that other industries possess. It takes months to list, market, contract and close on a home sale. People are already returning to vacation rentals both in Gulf Shores, Ala., and the Florida beaches."
Tim Taylor, owner of vacation rental and sales company Ocean Reef Resorts in Destin, on the Florida Panhandle, agreed.
"Up until April 22nd, we were 30 percent ahead of last year. Our business was way down in May and June from ’09. But now we’re ahead of last year. More people have been making offers than we’ve had in months, ever since last month," Taylor said.
"We’re making a lot of (vacation rental) reservations. Our phones are ringing. Once the well got capped a few weeks ago people started calling again. I think its more due to pricing than anything else," he said, adding that property prices have finally come down to pre-bubble levels.
The company is one of thousands to have submitted a claim to BP for economic losses resulting from the spill. The company submitted a claim on July 15 but has yet to hear back from BP, he said.
"If they don’t respond in 90 days, then we’re allowed to go to court and we can then ask for punitive damages, so it suits me fine if we go to court," he added.
The company is also the lead plaintiff in one of the class-action lawsuits against the oil giant. The company is suing to recover the about $1.1 million in rental bookings it claims it lost in May alone, Taylor said. It filed the suit for income loss under the Oil Pollution Act of 1990, which was enacted largely in response to the Exxon Valdez spill in 1989. So far, both sides are fighting over jurisdiction, Taylor said.
BP has asked that the at least 250 class-action lawsuits filed against it be sent to the energy industry’s corporate capital, Houston, according to the Los Angeles Times.
Those who wish to file claims relating to the oil spill can call (800) 440-0858 or submit them online. An article at the National Association of Realtors’ HouseLogic site offers some tips to submitting oil spill claims.
|County||Area||# Properties||Avg. Loss Per Property||Total Est. Loss (in millions)|
|Bay||Panama City-Lynn Haven-Panama City Beach, Fla.||54,701||$43,219||$2,364|
|Brevard||Palm Bay-Melbourne-Titusville, Fla.||66,327||$48,240||$3,200|
|Broward||Miami-Fort Lauderdale-Pompano Beach, Fla.||19,203||$55,031||$1,057|
|Collier||Naples-Marco Island, Fla.||14,262||$44,877||$640|
|Escambia||Pensacola-Ferry Pass-Brent, Fla.||39,368||$39,882||$1,570|
|Hillsborough||Tampa-St. Petersburg-Clearwater, Fla.||32,475||$50,200||$1,630|
|Lee||Cape Coral-Fort Myers, Fla.||49,429||$47,251||$2,336|
|Miami-Dade||Miami-Fort Lauderdale-Pompano Beach, Fla.||32,194||$48,935||$1,575|
|Monroe||Key West, Fla.||79,399||$35,603||$2,827|
|Palm Beach||Miami-Fort Lauderdale-Pompano Beach, Fla.||41,619||$54,029||$2,249|
|Pinellas||Tampa-St. Petersburg-Clearwater, Fla.||86,968||$45,702||$3,975|
|Volusia||Deltona-Daytona Beach-Ormond Beach, Fla.||45,699||$45,866||$2,096|