Gulf Coast Real Estate Recovering?

Experts say the environment in and around the Gulf of Mexico is starting to recover after this year’s massive oil spill, but home values may take much longer to come back. Gulf real estate business dropped off fast after the spill. Both sales numbers and property values are expected to remain low.

The BP well in the Gulf of Mexico spewed oil for three months before it was capped, albeit temporarily, last month. The human impacts on Gulf Coast fishing, tourism and other industries are considerable, and have been much discussed. However, few have analyzed the spill’s impact on the region’s property values.

5 year forecast

This month, CoreLogic released such an analysis, and it paints a grim picture. The group estimates that the spill will lower home values by a collective $648 million in the next year. Over the next five years, the impact could add up to $3 billion in the best-case scenario, or $28 billion in the worst case.

This analysis only considers homes in the region most directly impacted by the spill — more than 671,000 residential properties within one kilometer, or 0.6 miles, of the coast.

Of course, buyers paid a premium for beach access from these homes. If the beaches remain closed or unsafe for five years, the “beach premium” will be greatly diminished, according to CoreLogic. According to the company’s analysis, beachfront homes could lose $80,000 in value as a direct result of the spill.

The company estimates a total loss of $1.6 billion in Pensacola, Florida, and $1.2 billion in Gulfport, Miss. Gulfport would see the greatest drop per home. It is the closest large beachfront resort community to the spill site.

Out of the mouths of real estate agents

Real estate agents in the area say the spill has halted sales and is hurting both property values and their business. Five real estate associations are receiving a collective $60 million from the BP recovery fund. Real estate agents in Alabama, Florida, Louisiana, Mississippi and Texas may be eligible for $12,000 in damages if they can prove the spill caused a significant loss of income.

Mobile, Alabama, saw a 25 percent drop in property sales from June 2009 to June 2010. The drop was even steeper in some parts of Florida, where the real estate market had already been battered by the recession.

Even if the fish and oil-covered birds stop washing up on Gulf Coast shores, it could be many years before buyers start paying current values for beachfront homes.