The Gulf of Mexico oil spill is expected to take a toll on real estate prices in the region. According to a Bloomberg News report, coastal homes in the region could each lose as much as $56,000 in value.
The estimate comes from CoreLogic Inc., which said that losses along the coast may total $648 million in 2010 and $3 billion over five years. This in an area where buyers have long been willing to pay a premium for waterfront property.
To reach its estimate, Bloomberg said CoreLogic examined records of 600,000 residential properties within 1,000 meters of the coast in 15 counties in Mississippi, Alabama and Florida. Potential losses were calculated by comparing the price differences of beachfront and inland home. Of note, the company said it had insufficient property data to analyze Louisianaâ€™s coast
More than 600,000 properties from Alabama to Floridaâ€™s Atlantic coast could face devaluation, CoreLogic said. The hardest hit areas are expected to be in Gulfport, Mississippi, Mobile, Alabama, and Pensacola, Florida.
According to Bloomberg, it may not matter if the oil comes ashore in a particular area. The catastrophe alone is enough to scare off many buyers.
It’s happening already. The president of the Pensacola Association of Realtors told Bloomberg that that sales there were down 50 percent in May and June. The median single-family home price in Pensacola was $151,300 in June, down 14 percent from a peak of $175,600 in July 2005, according to Florida Association of Realtors data.
The Oil Pollution Act of 1990 lays out a framework for compensating oil spill victims, including for property value losses, Bloomberg said. A spokesperson for BP said the company is reviewing each loss of property claim individually.
Kenneth Feinberg, who is overseeing the $20 billion BP oil spill compensation fund, has also said such claims will be decided on a case-by-case basis.
â€œThereâ€™s no question that the property value has diminished as a result of the spill,â€ he said during a June 30 congressional hearing. â€œThat doesnâ€™t mean that every property is entitled to compensation.â€
In Florida, the governor has signed an executive order authorizing property appraisers in 26 counties to update assessments so owners can â€œsubstantiate claims against BP or other responsible parties.â€